<PAGE>
Registration No. 333-63537
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
ILLINOIS POWER SPECIAL PURPOSE TRUST
(Issuer of Securities)
ILLINOIS POWER SECURITIZATION LIMITED LIABILITY COMPANY
(Depositor of the Trust as described herein)
(Exact name of Registrant as Specified in Its Certificate of Formation)
<TABLE>
<S> <C>
DELAWARE 37-1376566
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
ILLINOIS POWER SECURITIZATION LIMITED LIABILITY COMPANY
500 SOUTH 27TH STREET, DECATUR, ILLINOIS 62521, (217) 450-2435
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
--------------------------
ERIC B. WEEKES, MANAGER
500 SOUTH 27TH STREET, DECATUR, ILLINOIS 62521, (217) 362-7635
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
WITH COPIES TO:
Owen E. MacBride Renwick D. Martin
Schiff Hardin & Waite Brown & Wood LLP
7200 Sears Tower One World Trade Center
Chicago, Illinois 60606 New York, New York 10048-0557
(312) 258-5680 (212) 839-5319
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of this prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO AGGREGATE PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Transitional Funding Trust Notes............ $864,000,000 100% $864,000,000 $240,192(2)
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) The registration fee was previously paid in connection with filings made on
September 16, 1998 and December 4, 1998.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER , 1998)
ILLINOIS POWER SPECIAL PURPOSE TRUST
$864,000,000 ILLINOIS POWER SPECIAL PURPOSE TRUST
TRANSITIONAL FUNDING TRUST NOTES, SERIES 1998-1
$ CLASS A-1 % NOTES
$ CLASS A-2 % NOTES
$ CLASS A-3 % NOTES
$ CLASS A-4 % NOTES
$ CLASS A-5 % NOTES
$ CLASS A-6 % NOTES
$ CLASS A-7 % NOTES
ILLINOIS POWER COMPANY
SERVICER
---------------------
The Illinois Power Special Purpose Trust Transitional Funding Trust Notes,
Series 1998-1 (the "Offered Notes"), offered hereby will consist of the seven
classes listed above. Each Offered Note will be secured primarily by, and
payable from, the Intangible Transition Property owned by the Trust, as
described under "Description of the Intangible Transition Property" herein and
in the Prospectus and by the other Note Collateral described under "Security for
the Notes" in the Prospectus.
------------------------------
THERE CURRENTLY IS NO SECONDARY MARKET FOR THE OFFERED NOTES, AND THERE IS
NO ASSURANCE THAT ONE WILL DEVELOP. PROSPECTIVE INVESTORS SHOULD CONSIDER, AMONG
OTHER THINGS, THE INFORMATION SET FORTH UNDER THE CAPTION "RISK FACTORS," WHICH
BEGINS ON PAGE 29 IN THE PROSPECTUS.
------------------------------
THE OFFERED NOTES OFFERED HEREBY DO NOT CONSTITUTE A DEBT, LIABILITY OR
OTHER OBLIGATION OF THE STATE OF ILLINOIS OR OF ANY POLITICAL SUBDIVISION,
AGENCY OR INSTRUMENTALITY THEREOF AND DO NOT REPRESENT AN INTEREST IN OR
OBLIGATION OF ILLINOIS POWER COMPANY OR ANY OF ITS AFFILIATES. NONE OF THE
OFFERED NOTES OR THE UNDERLYING INTANGIBLE TRANSITIONAL PROPERTY WILL BE
GUARANTEED OR INSURED BY ILLINOIS POWER COMPANY OR ITS AFFILIATES.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC (1) DISCOUNTS (2) TRUST (1)(3)
<S> <C> <C> <C>
Per Class A-1 Note............................................. % % %
Per Class A-2 Note............................................. % % %
Per Class A-3 Note............................................. % % %
Per Class A-4 Note............................................. % % %
Per Class A-5 Note............................................. % % %
Per Class A-6 Note............................................. % % %
Per Class A-7 Note............................................. % % %
Total.......................................................... $ $ $
</TABLE>
(1) Plus accrued interest, if any, at the applicable Note Interest Rate from
, 1998.
(2) Illinois Power Securitization Limited Liability Company and Illinois Power
Company have agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deduction of expenses payable by the Trust estimated to be
$3,000,192.
------------------------------
The Offered Notes are offered severally by the Underwriters when, as and if
issued by the Trust and subject to receipt and acceptance by the Underwriters
and subject to their right to reject orders in whole or in part. It is expected
that the Offered Notes will be delivered on or about , 1998, in
book-entry form through the facilities of The Depository Trust Company, Cedel
Bank, societe anonyme, and the Euroclear System.
------------------------------
MERRILL LYNCH & CO. SALOMON SMITH BARNEY
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE
FIRST CHICAGO CAPITAL MARKETS, INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
ABN AMRO INCORPORATED
A.G. EDWARDS & SONS, INC.
J.P. MORGAN & CO.
LOOP CAPITAL MARKETS,
LLC
------------------------------
The date of this Prospectus Supplement is December , 1998.
<PAGE>
Interest on each Class of Offered Notes at the applicable Note Interest Rate
will be payable quarterly on March 25th, June 25th, September 25th and December
25th or, if any such day is not a Business Day, the next succeeding Business Day
(each, a "Payment Date") commencing , 1999. See "Description of the
Offered Notes" herein.
The Offered Notes are part of a separate Series of Illinois Power Special
Purpose Trust Transitional Funding Trust Notes being offered by the Trust from
time to time pursuant to a Prospectus dated December , 1998 (the
"Prospectus"), of which this Prospectus Supplement is a part and which
accompanies this Prospectus Supplement.
THE INTANGIBLE TRANSITION PROPERTY ASSIGNED TO THE TRUST BY THE GRANTEE AND
CERTAIN OTHER ASSETS OF THE TRUST ARE THE SOLE SOURCE OF PAYMENTS ON THE OFFERED
NOTES. NONE OF ILLINOIS POWER COMPANY OR ITS AFFILIATES WILL HAVE ANY
OBLIGATIONS IN RESPECT OF THE OFFERED NOTES OR THE INTANGIBLE TRANSITION
PROPERTY, EXCEPT AS EXPRESSLY SET FORTH IN THE PROSPECTUS.
THE TRANSITIONAL FUNDING ORDER AUTHORIZING THE ISSUANCE OF THE OFFERED NOTES
DOES NOT CONSTITUTE A PLEDGE OF THE FULL FAITH AND CREDIT OF THE STATE OF
ILLINOIS OR ANY OF ITS POLITICAL SUBDIVISIONS. THE ISSUANCE OF THE OFFERED NOTES
UNDER THE FUNDING LAW SHALL NOT DIRECTLY, INDIRECTLY OR CONTINGENTLY OBLIGATE
THE STATE OF ILLINOIS OR ANY POLITICAL SUBDIVISION THEREOF TO LEVY OR TO PLEDGE
ANY FORM OF TAXATION THEREFOR OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICES OF THE OFFERED NOTES,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
OFFERED NOTES AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
Prospective investors should refer to the "Index of Principal Definitions"
which begins on page S-23 herein and which begins on page 121 in the Prospectus
for the location of the definitions of capitalized terms that appear in the
Prospectus and this Prospectus Supplement.
S-2
<PAGE>
REPORTS TO HOLDERS
Unless and until the Offered Notes are no longer issued in book-entry form,
the Servicer indirectly will provide to Cede & Co., as nominee of The Depository
Trust Company ("DTC") and registered holder of the Offered Notes and, upon
request, to Participants of DTC, periodic reports concerning the Offered Notes.
See "Servicing -- Statements by Servicer" in the Prospectus. Such reports may be
made available to the holders of interests in the Offered Notes (the
"Noteholders") upon request to their Participants. Such reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. The financial information provided to Noteholders will
not be examined and reported upon, nor will an opinion thereon be provided, by
any independent public accountant.
Illinois Power Securitization Limited Liability Company (the "Grantee"), on
behalf of the Trust, will file with the Securities and Exchange Commission (the
"Commission") such periodic reports as are required by the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules, regulations or
orders of the Commission thereunder. Copies of the Registration Statement and
exhibits thereto may be obtained at the locations specified in the Prospectus
under "Available Information" at prescribed rates. Information filed with the
Commission can also be inspected at the Commission's site on the World Wide Web
at http://www.sec.gov. The Grantee may discontinue filing periodic reports under
the Exchange Act at the beginning of the fiscal year following the issuance of
the Offered Notes if there are fewer than 300 holders of such Offered Notes.
S-3
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
THE FOLLOWING PROSPECTUS SUPPLEMENT SUMMARY IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE DETAILED INFORMATION APPEARING ELSEWHERE HEREIN AND IN THE
PROSPECTUS. CERTAIN CAPITALIZED TERMS USED BUT NOT DEFINED IN THIS PROSPECTUS
SUPPLEMENT SUMMARY HAVE THE MEANINGS ASCRIBED TO SUCH TERMS ELSEWHERE IN THIS
PROSPECTUS SUPPLEMENT OR, TO THE EXTENT NOT DEFINED HEREIN, HAVE THE MEANINGS
ASCRIBED TO SUCH TERMS IN THE PROSPECTUS. THE INDEX OF PRINCIPAL DEFINITIONS
INCLUDED IN THIS PROSPECTUS SUPPLEMENT WHICH BEGINS ON PAGE S-23 SETS FORTH THE
PAGES ON WHICH THE DEFINITIONS OF CERTAIN PRINCIPAL TERMS APPEAR.
<TABLE>
<S> <C>
Summary of Offered Notes........ The Illinois Power Special Purpose Trust Transitional
Funding Trust Notes, Series 1998-1 (the "Offered Notes").
On the date of initial issuance of the Offered Notes (the
"Series Issuance Date"), the Offered Notes will be issued
as described below.
</TABLE>
<TABLE>
<CAPTION>
INITIAL EXPECTED FINAL NOTE
PRINCIPAL MATURITY MATURITY INTEREST
CLASS AMOUNT DATE DATE RATE
- -------------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C>
A-1........... %
A-2........... %
A-3........... %
A-4........... %
A-5........... %
A-6........... %
A-7........... %
</TABLE>
- ------------------------
<TABLE>
<S> <C>
Transaction Overview............ For a brief summary of the statutes and proceedings which
form the basis for the issuance and sale of the Offered
Notes by the Trust, and a diagram of the parties to the
transaction, their roles and their various relationships
to the other parties, investors are directed to the
discussion under the heading "Prospectus Summary --
Transaction Overview" in the Prospectus.
The Trust, whose primary asset will be Intangible
Transition Property transferred to the Trust pursuant to
the Sale Agreements, will issue the Offered Notes, which
will be sold to the Underwriters. The Offered Notes will
be secured primarily by, and payable from, all of the
Intangible Transition Property (whether created by the
Transitional Funding Order issued by the ICC on September
10, 1998 (the "1998 TFO") or any other Transitional
Funding Order) which has been transferred to the Trust
pursuant to a Sale Agreement. The Offered Notes also will
be secured by the Grant Agreements, the Sale Agreements
and the Servicing Agreement; the Collection Account and
all amounts of cash or investment property on deposit
therein or credited thereto from time to time; all rights
to compel Illinois Power Company, as Servicer (or any
successor), to file for and obtain adjustments to the IFC
Charges in accordance with Section 18-104(d) of the
Funding Law, the Transitional Funding Orders, including
the 1998 TFO and all IFC Tariffs, including the 1998 IFC
Tariff (as hereinafter defined) filed with the ICC in
connection therewith; all present and future claims,
demands, causes and choses in action in respect of any or
all of the foregoing; and all payments on or under and all
proceeds in respect of any or all of the foregoing.
</TABLE>
S-4
<PAGE>
<TABLE>
<S> <C>
The IFC Charges are calculated to be sufficient over time
to (a) pay interest and make Scheduled Payments on the
Offered Notes, (b) pay all related fees and expenses of
the Trust and the Grantee, including the Servicing Fee and
any Administration Fee, (c) replenish the Capital
Subaccount up to the Required Capital Level, and (d) fund
and maintain the Overcollateralization Subaccount up to
the Required Overcollateralization Level. These payments
are collectively referred to herein as the "Specified
Payments." The IFC Charges will be increased in connection
with the issuance of any additional Notes pursuant to any
subsequent Transitional Funding Order, to a level
calculated to be sufficient over time to make the
Specified Payments in respect of all outstanding Notes.
To enhance the likelihood of timely recovery of the
amounts necessary to make the Specified Payments, the IFC
Charges may be increased from time to time through
Adjustments, as described in the Prospectus, over the life
of the Notes (including the Offered Notes). See
"Description of the Intangible Transition Property --
Adjustments to Instrument Funding Charges" in the
Prospectus.
Risk Factors.................... Investors should consider the risks associated with an
investment in the Offered Notes. For a discussion of
certain material risks associated therewith, investors
should review the discussion under "Risk Factors" which
begins on page 29 of the Prospectus.
The Offered Notes............... The Offered Notes hereunder are the Illinois Power Special
Purpose Trust Transitional Funding Trust Notes, Series
1998-1. The Offered Notes are comprised of the seven
classes listed on the cover page hereof (each, a "Class").
As of the Series Issuance Date, the aggregate principal
balance of the Offered Notes (the "Original Note Principal
Balance") will be $864,000,000. Each Class of Offered
Notes will have a principal balance (the "Class Principal
Balance") equal to the initial principal amount of such
Class, reduced by principal paid to such Class in
accordance with the terms of the Indenture. See
"Description of the Offered Notes" herein and "Description
of the Notes" in the Prospectus.
None of the Offered Notes or the underlying Intangible
Transition Property will be guaranteed or insured by
Illinois Power Company or any of its affiliates. The 1998
TFO authorizing the issuance of the Offered Notes does not
constitute a pledge of the full faith and credit of the
State of Illinois or of any of its political subdivisions.
The issuance of the Offered Notes under the Funding Law
shall not directly, indirectly or contingently obligate
the State of Illinois or any political subdivision, agency
or instrumentality thereof to levy or to pledge any form
of taxation therefor or to make any appropriation for
their payment. The Offered Notes will be payable solely by
application of the proceeds of the Intangible Transition
Property and the other Note Collateral held by the
Indenture Trustee under the Indenture. If additional Notes
(other than the Offered Notes) are subsequently issued
under the Indenture, the Offered Notes will be at least
PARI PASSU with such other Notes as to all of the
Intangible Transition Property and the other Note
Collateral. Any and all funds or property released by the
Indenture
</TABLE>
S-5
<PAGE>
<TABLE>
<S> <C>
Trustee pursuant to the Indenture will cease to be Note
Collateral and will no longer be available for payment of
the Offered Notes.
Servicer/Administrator.......... Illinois Power Company, an Illinois corporation ("Illinois
Power") and a subsidiary of Illinova Corporation, an
Illinois corporation, will act as the initial servicer (in
such capacity, and together with any successor servicer,
the "Servicer") of the Intangible Transition Property
pursuant to the terms of the Servicing Agreement, and as
the initial administrator (in such capacity, and together
with any successor administrator, the "Administrator") of
the Grantee pursuant to the terms of an Administration
Agreement between the Grantee and the Administrator (the
"Administration Agreement"). For a more complete
discussion of Illinois Power and its role as Servicer, see
"The Servicer" herein and in the Prospectus.
Grantee......................... The grantee of the Intangible Transition Property will be
Illinois Power Securitization Limited Liability Company, a
special purpose Delaware limited liability company (the
"Grantee"), whose sole member is Illinois Power. Pursuant
to the Sale Agreement entered into with respect to the
issuance by the Trust of the Offered Notes, the Grantee
will assign all of its right, title and interest in the
Intangible Transition Property created by the 1998 TFO
(the "1998 ITP"), the Servicing Agreement and certain
other related assets to the Trust. For a more complete
discussion of the Grantee, see "The Grantee" in the
Prospectus.
Trust........................... The issuer of the Offered Notes will be the Illinois Power
Special Purpose Trust (the "Trust"), a Delaware business
trust created under a Declaration of Trust (the "Trust
Agreement") by and among the Delaware Trustee and the
Beneficiary Trustees. For a more complete discussion of
the Trust, see "The Trust" in the Prospectus.
Delaware Trustee................ First Union Trust Company, National Association, acting
not in its individual or corporate capacity, but solely as
trustee under the Trust Agreement (the "Delaware
Trustee").
Beneficiary Trustees............ Cynthia G. Steward and Eric B. Weekes.
Indenture....................... The Offered Notes will be issued pursuant to the terms of
the Indenture through the execution and delivery of a
Trust issuance certificate or a supplement to the
Indenture. The 1998 ITP, any other subsequent Intangible
Transition Property created by subsequent Transitional
Funding Orders and the other Note Collateral will be
pledged under the Indenture for the benefit of the
Noteholders. The Indenture will be qualified under the
Trust Indenture Act of 1939.
Indenture Trustee............... Harris Trust and Savings Bank, an Illinois banking
corporation, acting not in its individual or corporate
capacity, but solely as trustee under the Indenture (the
"Indenture Trustee").
Intangible Transition
Property...................... As more fully described under "Description of the
Intangible Transition Property" herein and in the
Prospectus, the Intangible Transition Property, including
the 1998 ITP, is the separate property right as set forth
in the Funding Law and created under the Transitional
Funding Orders, including the 1998 TFO,
</TABLE>
S-6
<PAGE>
<TABLE>
<S> <C>
including, without limitation, the right, title and
interest to impose and receive the IFC Charges authorized
thereby and all related revenues, collections, claims,
payment, money, or proceeds thereof, including all right,
title, and interest under and pursuant to such
Transitional Funding Orders.
IFC Charges..................... As more fully described under "Description of the
Intangible Transition Property" in the Prospectus, IFC
Charges are nonbypassable, usage-based, per kilowatt hour
charges to be imposed on each existing and future retail
customer or class of retail customers in Illinois Power's
service area in Illinois, or other person or group of
persons obligated from time to time to pay to Illinois
Power or any successor Applicable Rates. In addition, the
1998 TFO specifies that Illinois Power will not enter into
private contracts with customers who, but for such
contracts, would otherwise have been obligated to pay
Applicable Rates unless the customer agrees to pay amounts
equal to the IFC Charges the customer would have paid, had
the services provided under the private contract been
subject to Applicable Rates, to the Trust or to Illinois
Power as Servicer. (The customers described in the
preceding two sentences are referred to herein
collectively as the "Customers".)
The IFC Charges authorized in the 1998 TFO (the "1998
Authorized IFC Charges"), which Illinois Power believes
are higher than will actually be required to make all
payments on the Offered Notes based on certain assumptions
contained in its application for the 1998 TFO, including
an assumption that the Notes will bear interest at a rate
of 7.5% per annum, are set forth in "Description of the
Intangible Transition Property" herein.
As required by the Funding Law, any increase in the amount
of the IFC Charges for any of the IFC Customer Classes
beyond the level of the 1998 Authorized IFC Charges for
such IFC Customer Classes shall require Illinois Power or
any successor Utility thereto to file an amendatory tariff
adjusting the amounts otherwise billable by Illinois Power
or such successor Utility for Applicable Rates to offset
the amount of such excess (or, if Illinois Power or such
successor Utility shall have previously filed any such
amendatory tariffs, the incremental amount of such
excess). However, the failure of such amendatory tariff to
become effective for any reason shall not delay or impair
the effectiveness of the increase in the IFC Charges.
In connection with the issuance and pricing of the Offered
Notes, Illinois Power filed an IFC Tariff with the ICC
(the "1998 IFC Tariff") which provides for, among other
things, certain revisions to the IFC Charges. The actual
initial cents per kilowatt-hour IFC
</TABLE>
S-7
<PAGE>
<TABLE>
<S> <C>
Charge payable by each of the seven (7) IFC Customer
Classes beginning on the Series Issuance Date is as
follows:
</TABLE>
<TABLE>
<CAPTION>
IFC CHARGES (CENTS
IFC CUSTOMER CLASS PER KWH)
---------------------------------------------- -------------------
<S> <C> <C>
Residential...................................
Small Commercial..............................
Large Commercial..............................
Municipal.....................................
Industrial Firm...............................
Industrial High Load Factor Firm..............
Industrial Non-Firm...........................
</TABLE>
<TABLE>
<S> <C>
Adjustments to the IFC
Charges....................... The Servicing Agreement and the 1998 TFO require the
Servicer to calculate Adjustments to the IFC Charges. The
Reconciliation Periods for the Offered Notes will be
December 1 through May 31 and June 1 through November 30
and the Adjustment Dates will be January 1 and July 1,
commencing July 1, 1999. The Adjustments to the IFC
Charges will continue until all interest and principal on
all the Offered Notes have been paid in full, subject only
to the limitation of the maximum amount of Intangible
Transition Property authorized by the ICC in the related
Transitional Funding Order or Orders. In addition, the IFC
Charges will be increased in connection with the issuance
of additional Notes pursuant to any subsequent
Transitional Funding Order, to a level calculated to be
sufficient over time to provide for Specified Payments in
respect of all outstanding Notes. For a detailed
discussion of Adjustments to IFC Charges, see "Description
of the Intangible Transition Property -- Adjustments to
Instrument Funding Charges" herein and in the Prospectus.
Payment Dates................... Payments will be made to holders of the Offered Notes on
each March 25th, June 25th, September 25th and December
25th (or, if any such date is not a Business Day, the next
succeeding Business Day), commencing , 1999 (each,
a "Payment Date").
Record Dates.................... With respect to any Payment Date or date of any
redemption, the Business Day preceding such Payment Date
or other date if the Offered Notes are Book-Entry Notes
or, if Definitive Notes are issued, the last day of the
preceding calendar month (each, a "Record Date").
Expected Maturity and Final
Maturity Dates................ The "Expected Maturity Date" for any Class will be the
date when all principal and interest on such Class of
Offered Notes is expected to be paid in full by the Trust.
The "Final Maturity Date" for any Class corresponds to the
date on which such Class of Offered Notes may be
accelerated for failure to pay outstanding principal
thereon. The Expected Maturity Date and the Final Maturity
Date for each Class of Offered Notes are specified above
under "-- Summary of Offered Notes."
Failure to pay principal on any Class of Offered Notes in
full by the Final Maturity Date shall constitute an Event
of Default, and the
</TABLE>
S-8
<PAGE>
<TABLE>
<S> <C>
Indenture Trustee may and, upon the written direction of
the holders of not less than a majority in principal
amount of all Notes of all Series then outstanding, shall
declare the unpaid principal amount of all the Notes of
all Series then outstanding to be due and payable. See
"Security for the Notes -- Events of Default; Rights Upon
Event of Default" and "Ratings" in the Prospectus.
Issuance of Additional Series... The Trust may issue additional Series of Notes from time
to time. An additional Series may be issued only upon
satisfaction of the conditions described under
"Description of the Notes -- Conditions of Issuance of
Additional Series and Acquisition of Subsequent Intangible
Transition Property" in the Prospectus.
Interest........................ On each Payment Date, the Indenture Trustee shall pay pro
rata to the Noteholders of each Class as of the related
Record Date any unpaid interest payable on any prior
Payment Dates (together with, to the extent permitted by
applicable law, interest on such unpaid interest at the
applicable Note Interest Rate), and interest in an amount
equal to one-fourth of the product of (a) the applicable
Note Interest Rate and (b) the applicable Class Principal
Balance as of the close of business on the preceding
Payment Date after giving effect to all payments of
principal made to the Noteholders on such preceding
Payment Date; provided, however, that with respect to the
initial Payment Date, interest on each outstanding Class
Principal Balance will accrue from and including the
Series Issuance Date to, but excluding, such initial
Payment Date. Interest will be calculated on the basis of
a 360-day year of twelve 30-day months. Interest on the
Offered Notes will be distributed prior to any
distribution of principal on the Offered Notes. See
"Description of the Offered Notes -- Payments of Interest"
herein and "Description of the Notes -- Interest and
Principal" in the Prospectus.
Principal....................... Unless an Event of Default has occurred and is continuing
and the Offered Notes have been declared due and payable,
on each Payment Date, the Indenture Trustee shall, as of
the related Record Date and subject to availability of
funds in the Collection Account, make principal payments
on the Offered Notes in the following order and priority,
in each case until the Class Principal Balance for such
Class has been reduced to zero: (1) to the holders of the
Class A-1 Notes; (2) to the holders of the Class A-2
Notes; (3) to the holders of the Class A-3 Notes; (4) to
the holders of the Class A-4 Notes; (5) to the holders of
the Class A-5 Notes; (6) to the holders of the Class A-6
Notes; and (7) to the holders of the Class A-7 Notes;
provided, however, that, unless an Event of Default has
occurred and is continuing and the Offered Notes have been
declared due and payable, in no event shall the principal
payment on any Class on a Payment Date be greater than the
Scheduled Payment for such Class and Payment Date. See
"Description of the Offered Notes -- Payments of
Principal" herein and "Description of the Notes --
Interest and Principal" in the Prospectus.
Optional Redemption............. Pursuant to the terms of the Indenture, the Offered Notes
may be redeemed on any Payment Date if, after giving
effect to payments that would otherwise be made on such
date, the outstanding
</TABLE>
S-9
<PAGE>
<TABLE>
<S> <C>
principal balance of the Offered Notes has been reduced to
less than five percent (5%) of the initial principal
balance thereof. The Notes may be so redeemed upon payment
of the outstanding principal amount of the Notes and
accrued but unpaid interest thereon as of the date of
redemption. See "Description of the Offered Notes --
Optional Redemption" herein.
Collection Account and
Subaccounts................... Upon issuance of the Offered Notes, a Collection Account
will be established and held by the Indenture Trustee for
the benefit of the Noteholders of all outstanding Series
of Notes. The Collection Account will consist of four
subaccounts: a general subaccount (the "General
Subaccount"), a reserve subaccount (the "Reserve
Subaccount"), a subaccount for the Overcollateralization
Amount (the "Overcollateralization Subaccount"), and a
capital subaccount (the "Capital Subaccount"). Unless the
context indicates otherwise, references herein to the
Collection Account include each of the subaccounts
contained therein. Withdrawals from and deposits to these
subaccounts will be made as described under "Security for
the Notes -- Allocations; Payments" in the Prospectus.
Credit Enhancement.............. The Offered Notes will benefit from the following forms of
credit enhancement:
OVERCOLLATERALIZATION. The Overcollateralization Amount
established in connection with the issuance of the Offered
Notes will be $4,320,000, which is 0.50 percent of the
initial aggregate Class Principal Balance for all of the
Offered Notes. The IFC Charges will be set and adjusted at
a rate that is intended to recover, among other things,
the Overcollateralization Amount over the life of the
Offered Notes according to the schedule set forth under
"Description of the Offered Notes -- Overcollateralization
Amount" herein. Collections allocated to the
Overcollateralization Amount for all Series of Notes,
including the Offered Notes, will be held in the
Overcollateralization Subaccount, as described further
under "Security for the Notes -- Description of Indenture
Accounts -- Overcollateralization Subaccount" in the
Prospectus and any such amounts will be available to pay
interest and make Scheduled Payments on all Series of
Notes, including the Offered Notes, to the extent of any
shortfalls in current IFC Collections and the Reserve
Subaccount available for such payment. The amount required
to be on deposit in the Overcollateralization Subaccount
with respect to the Offered Notes as of any Payment Date,
as specified in the schedule set forth under "Description
of the Offered Notes -- Overcollateralization Amount"
herein, is referred to herein as the "Required
Overcollateralization Level."
RESERVE SUBACCOUNT. IFC Collections available with respect
to any Payment Date in excess of amounts necessary to make
the Specified Payments (all as described under "Security
for the Notes -- Allocations; Payments" in the
Prospectus), will be allocated to the Reserve Subaccount.
On each Payment Date, the Indenture Trustee will draw on
amounts in the Reserve Subaccount to the extent amounts
available in the General Subaccount are insufficient to
pay expenses of the Trust and the Grantee and to pay
</TABLE>
S-10
<PAGE>
<TABLE>
<S> <C>
interest and make Scheduled Payments on the Notes and to
make other payments and transfers in accordance with the
terms of the Indenture.
CAPITAL SUBACCOUNT. Upon the issuance of the Offered
Notes, the Trust will retain proceeds in the amount of
$4,220,000, which is 0.50 percent of the initial aggregate
Class Principal Balance for all of the Offered Notes less
$100,000 in the aggregate for all Series of Notes, which
will be transferred to the Grantee. Such amount is the
Required Capital Level with respect to the Offered Notes
and, together with the Required Capital Level with respect
to any other Series of Notes, will be deposited into the
Capital Subaccount. Withdrawals from and deposits to the
Capital Subaccount will be made as described under
"Security for the Notes -- Allocations; Payments" in the
Prospectus.
Allocations and Payment......... On each Payment Date, amounts on deposit in the Collection
Account will be applied in the manner described under
"Security for the Notes -- Allocations; Payments" in the
Prospectus.
Servicing Compensation.......... The Servicer will be entitled to receive a servicing fee
on each Payment Date (the "Servicing Fee"), in an amount:
(a) equal to $540,000, for so long as IFC Charges are
billed concurrently with charges otherwise billed by the
Servicer to Customers or (b) not to exceed $3,240,000, if
IFC Charges are not billed concurrently with charges
otherwise billed by the Servicer to Customers. (Under the
Servicing Agreement, Illinois Power or any successor
thereto is required to bill IFC Charges concurrently with
charges for electric service or Applicable Rates so long
as Illinois Power or such successor is billing Customers
for such electric service or Applicable Rates.) The
Servicing Fee will be paid prior to the payment of any
amounts in respect of interest on and principal of the
Offered Notes. The Servicer will be entitled to retain as
additional compensation net investment income on IFC
Payments received by the Servicer prior to remittance
thereof to the Collection Account and the portion of late
fees, if any, paid by Customers relating to the IFC
Payments. See "Servicing -- Servicing Compensation" herein
and in the Prospectus.
No Servicer Advances............ The Servicer will not be obligated to make any advances of
interest or principal on the Offered Notes.
Maturity, Weighted Average Life
and Yield Considerations...... The actual Payment Dates on which principal is paid on
each Class of Offered Notes and, therefore, the weighted
average life and yield to maturity on the Offered Notes
may be affected by various factors, including principally
the rate and timing of receipt of IFC Collections and
amounts available in the Overcollateralization Subaccount,
Capital Subaccount and Reserve Subaccount. In addition,
because principal will be paid at a rate not faster than
that contemplated in the Expected Amortization Schedule,
except in the event of an optional redemption or the
acceleration of maturity of the Offered Notes after an
Event of Default, the Offered Notes are not expected to
mature earlier than scheduled. See "Risk Factors --
Potential Servicing Issues -- Possible Payment Delays
Caused by Inaccurate Usage and Credit
</TABLE>
S-11
<PAGE>
<TABLE>
<S> <C>
Projections", "-- Possible Payment Delays Caused by
Reliance on Alternative Retail Electric Suppliers and
Other Third-Party Collectors", "-- Uncertainties Related
to the Electric Industry Generally -- Shrinking Customer
Base as a Result of Municipalization", "-- Nature of the
Notes -- Uncertain Payment Amounts and Weighted Average
Life" and "Description of the Intangible Transition
Property -- Adjustments to IFC Charges" in the Prospectus.
Denominations................... Each Class of Offered Notes will be issued in minimum
initial denominations of $1,000 and in integral multiples
thereof.
Book-Entry Notes................ The Offered Notes will initially be represented by one or
more notes registered in the name of Cede & Co. ("Cede")
(each, a "Book-Entry Note"), the nominee of DTC, and
available only in the form of book-entries on the records
of DTC, its Participants and its Indirect Participants.
Holders may also hold Book-Entry Notes of a Series through
CEDEL or Euroclear (in Europe), if they are participants
in such systems or indirectly through organizations that
are participants in such systems. For a more complete
discussion of the Book-Entry Notes, see "Risk Factors --
Nature of the Notes" and "Description of the Notes --
Book-Entry Registration" in the Prospectus.
Ratings......................... It is a condition of issuance of the Offered Notes that
the Offered Notes be rated [ ] by Duff & Phelps Credit
Rating Company, [ ] by Fitch IBCA, Inc., [ ] by
Moody's Investors Service, Inc. and [ ] by Standard &
Poor's, a division of The McGraw-Hill Companies, Inc.
(each of such rating agencies, a "Rating Agency" and
collectively, the "Rating Agencies").
A security rating is not a recommendation to buy, sell or
hold securities and may be subject to revision or
withdrawal at any time. No person is obligated to maintain
any rating on any Offered Note and, accordingly, there can
be no assurance that the ratings assigned to any Class of
Offered Notes upon initial issuance thereof will not be
revised or withdrawn by a Rating Agency at any time
thereafter. If a rating of any Series or Class of Offered
Notes is revised or withdrawn, the liquidity of such Class
of Offered Notes may be adversely affected. In general,
the ratings address credit risk and do not represent any
assessment of the rate of principal payments on the
Offered Notes. See "Risk Factors -- Nature of the Notes --
Limited Liquidity", "-- Limited Nature of Ratings" and "--
Uncertain Payment Amounts and Weighted Average Life", and
"Certain Payment, Weighted Average Life and Yield
Considerations" in the Prospectus and "Ratings" herein and
in the Prospectus.
Taxation of the Notes........... Illinois Power has received a ruling from the Internal
Revenue Service (the "IRS") holding that, among other
things, the Offered Notes will be obligations of Illinois
Power for federal income tax purposes. In the opinion of
Mayer, Brown & Platt, interest paid on the Offered Notes
generally will be taxable to a United States Noteholder as
ordinary interest income at the time it accrues or is
received in accordance with such United States
Noteholder's method of accounting for United States
federal income tax
</TABLE>
S-12
<PAGE>
<TABLE>
<S> <C>
purposes. Such opinion assumes, based on the ruling from
the IRS described above, that the Notes will constitute
indebtedness of Illinois Power for federal income tax
purposes. See "Material United States Federal Tax
Consequences" herein and in the Prospectus.
ERISA Considerations............ The Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code"), impose
various requirements on employee benefit plans and certain
other plans and arrangements subject to ERISA, and on
persons who are fiduciaries with respect to such plans and
arrangements, in connection with the investment of assets
which are deemed to be "plan assets" for purposes of ERISA
or Section 4975 of the Code, unless a statutory or
administrative exemption is available. A fiduciary of any
employee benefit plan or other plan or arrangement that is
subject to ERISA or Section 4975 of the Code, before
purchasing the Notes, should therefore determine that an
investment in the Notes is consistent with the fiduciary
duties of ERISA and does not violate the prohibited
transaction provisions of ERISA or the Code.
</TABLE>
S-13
<PAGE>
DESCRIPTION OF THE OFFERED NOTES
GENERAL
The Offered Notes, together with any Notes of any other Series which may
hereafter be issued by the Trust (collectively, the "Notes"), will be issued by
the Trust pursuant to the Indenture and a Trust issuance certificate or a series
supplement, if any, thereto. Pursuant to the Indenture, further Trust issuance
certificates or series supplements may be executed in order for the Trust to
issue additional Series of Notes. In connection with the issuance of any
additional Series of Notes pursuant to a subsequent Transitional Funding Order,
the IFC Charges will be increased to a level calculated to be sufficient over
time to provide for, among other things, payment of all interest and principal
in respect of all outstanding Notes. This summary should be read together with
the material under the heading "Description of the Notes" in the Prospectus.
The Offered Notes will be comprised of the following seven Classes:
<TABLE>
<CAPTION>
INITIAL NOTE
PRINCIPAL EXPECTED FINAL INTEREST
CLASS AMOUNT MATURITY DATE MATURITY DATE RATE
- ------------------------------------- ----------- --------------- --------------------- -------------
<S> <C> <C> <C> <C>
A-1.................................. %
A-2.................................. %
A-3.................................. %
A-4.................................. %
A-5.................................. %
A-6.................................. %
A-7.................................. %
</TABLE>
SECURITY
To secure the payment of principal of and interest on the Offered Notes, the
Trust has granted to the Indenture Trustee, for the benefit of the Noteholders,
a security interest in all of the Trust's right, title and interest in and to
the 1998 ITP, any subsequent Intangible Transition Property created under any
subsequent Transitional Funding Order, and the other Note Collateral. If
additional Notes (other than the Offered Notes) are subsequently issued, the
Offered Notes will be at least PARI PASSU with such other Notes as to all of the
Intangible Transition Property and the other Note Collateral. The Note
Collateral is described more specifically under "Security for the Notes --
Pledge of Note Collateral" in the Prospectus.
PAYMENTS OF INTEREST
Interest on each Class of the Offered Notes will accrue from the Series
Issuance Date at the rates set forth on the cover page and above (each, a "Note
Interest Rate"), in each case payable quarterly on each Payment Date of each
year, commencing , 1999.
On each Payment Date, Noteholders of each Class of Offered Notes will be
entitled to receive pro rata any unpaid interest payable on any prior Payment
Dates (together with, to the extent permitted by applicable law, interest on
such unpaid interest at the applicable Note Interest Rate), and interest in an
amount equal to one-fourth of the product of (a) the applicable Note Interest
Rate and (b) the applicable Class Principal Balance as of the close of business
on the preceding Payment Date after giving effect to all payments of principal
made to the Noteholders on such preceding Payment Date; provided, however, that
with respect to the initial Payment Date, interest on each outstanding Class
Principal Balance will accrue from and including the Series Issuance Date to but
excluding such first Payment Date. Interest will be calculated on the basis of a
360-day year of twelve 30-day months. See "Description of the Notes -- Interest
and Principal" in the Prospectus.
S-14
<PAGE>
PAYMENTS OF PRINCIPAL
Unless an Event of Default has occurred and is continuing and the Offered
Notes have been declared due and payable, on each Payment Date, each Class of
the Offered Notes will be entitled to receive payments of principal as follows,
in each case until the Class Principal Balance for such Class has been reduced
to zero:
(1) to the holders of the Class A-1 Notes;
(2) to the holders of the Class A-2 Notes;
(3) to the holders of the Class A-3 Notes;
(4) to the holders of the Class A-4 Notes;
(5) to the holders of the Class A-5 Notes;
(6) to the holders of the Class A-6 Notes;
(7) to the holders of the Class A-7 Notes;
provided, however, that, unless an Event of Default has occurred and is
continuing and the Offered Notes have been declared due and payable, in no event
shall the principal payment on any Class on a Payment Date be greater than the
Scheduled Payment for such Class and Payment Date.
Principal will be payable at the Corporate Trust Office of the Indenture
Trustee in the City of Chicago, Illinois or at the office or agency of the
Indenture Trustee maintained for such purposes in the Borough of Manhattan, the
City of New York.
The following Expected Amortization Schedule sets forth the scheduled
outstanding Class Principal Balance for each Class of the Offered Notes at each
Payment Date from the Series Issuance Date to the Expected Maturity Date for
such Class. In preparing the following table, it has been assumed, among other
things, that (a) the Offered Notes are issued on , 1998, (b) payments
on the Offered Notes are made on each Payment Date, commencing ,
1999, (c) the Servicing Fee equals $540,000 per quarter, (d) there are no net
earnings on amounts on deposit in the Collection Account, (e) Operating
Expenses, Administration Fees, and amounts owed to the Delaware Trustee and the
Indenture Trustee are in the aggregate $ per quarter, and all such amounts
are payable in arrears, and (f) all IFC Collections are deposited in the
Collection Account in accordance with Illinois Power's forecasts.
EXPECTED AMORTIZATION SCHEDULE
OUTSTANDING PRINCIPAL BALANCE
<TABLE>
<CAPTION>
DATE CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4 CLASS A-5 CLASS A-6 CLASS A-7
- ---------------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Series Issuance Date
<CAPTION>
OFFERED NOTES
DATE TOTAL
- ---------------------- ---------------
<S> <C>
Series Issuance Date $ ____
</TABLE>
[INFORMATION TO BE PROVIDED]
There can be no assurance that the Class Principal Balances of the Offered
Notes will be reduced as indicated in the foregoing table, and the actual
reductions in such Class Principal Balances may be slower (or, if an Event of
Default occurs and is continuing and the Offered Notes have been declared due
and payable, faster) than those indicated in the chart. See "Risk Factors" in
the Prospectus for a discussion of various factors which may, individually or in
the aggregate, affect the rate of reductions of the Class Principal Balances of
the Offered Notes.
Each Class becomes due on its Final Maturity Date. The entire unpaid
principal amount of the Offered Notes will be due and payable on the date on
which an Event of Default has occurred and is
S-15
<PAGE>
continuing, if the Indenture Trustee or holders of not less than a majority in
principal amount of the Notes of all Series then outstanding have declared the
Offered Notes to be immediately due and payable. See "Security for the Notes --
Events of Default; Rights Upon Event of Default" in the Prospectus.
OPTIONAL REDEMPTION
The Offered Notes may be redeemed on any Payment Date commencing with the
Payment Date on which the outstanding principal balance of the Offered Notes
(after giving effect to payments that would otherwise be made on such date) has
been reduced to less than five percent (5%) of the initial principal balance of
the Offered Notes. Notice of such redemption will be given by the Trust to the
Indenture Trustee and the Rating Agencies not less than 25 days nor more than 50
days prior to the date of redemption, and written notice shall also be given to
each holder of Offered Notes to be redeemed by first-class mail, postage
prepaid, mailed not less than five days nor more than 25 days prior to the
applicable date of redemption.
OVERCOLLATERALIZATION AMOUNT
The 1998 TFO provides that the Trust, as the assignee of the Intangible
Transition Property, is entitled to collect an additional amount for the Offered
Notes (the "Overcollateralization Amount"), which is intended to enhance the
likelihood that payments on the Offered Notes will be made in accordance with
their respective Expected Amortization Schedules. The Overcollateralization
Amount established in connection with the issuance of the Offered Notes will be
$4,320,000, which is 0.50 percent of the initial aggregate principal amount of
the Offered Notes. The Overcollateralization Amount is scheduled to be collected
over the life of the Offered Notes in accordance with the Schedule set forth
hereinbelow. The Required Overcollateralization Level for the Offered Notes on
each Payment Date is as follows:
REQUIRED OVERCOLLATERALIZATION LEVEL SCHEDULE
<TABLE>
<CAPTION>
REQUIRED REQUIRED
OVERCOLLATERALIZATION OVERCOLLATERALIZATION
PAYMENT DATE LEVEL PAYMENT DATE LEVEL
- --------------------------- --------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
</TABLE>
[INFORMATION TO BE PROVIDED]
OTHER CREDIT ENHANCEMENT
RESERVE SUBACCOUNT. IFC Collections available with respect to any Payment
Date in excess of amounts necessary to make the Specified Payments (all as
described under "Security for the Notes -- Allocations; Payments" in the
Prospectus) will be allocated to the Reserve Subaccount. On each Payment Date,
the Indenture Trustee will draw on amounts in the Reserve Subaccount, to the
extent amounts available in the General Subaccount are insufficient to pay
expenses of the Trust and to pay interest and make Scheduled Payments on the
Notes and to make other payments and transfers in accordance with the terms of
the Indenture.
CAPITAL SUBACCOUNT. Upon the issuance of the Offered Notes, the Trust will
retain proceeds in the amount of $4,220,000, which is 0.50 percent of the
initial aggregate Class Principal Balance for all of the Offered Notes less
$100,000 in the aggregate for all series of Notes. Such amount is the Required
Capital Level with respect to the Offered Notes and, together with the Required
Capital Level with respect to any
S-16
<PAGE>
other Series of Notes, will be deposited into the Capital Subaccount.
Withdrawals from and deposits to the Capital Subaccount will be made as
described under "Security for the Notes -- Allocations; Payments" in the
Prospectus.
ALLOCATIONS; PAYMENTS
On each Payment Date, the Indenture Trustee will, at the direction of the
Servicer, apply all amounts on deposit in the Collection Account in the manner
described under "Security for the Notes -- Allocations; Payments" in the
Prospectus.
DESCRIPTION OF THE INTANGIBLE TRANSITION PROPERTY
1998 TFO
The Funding Law authorizes the ICC to issue the 1998 TFO in favor of the
Grantee at the request of Illinois Power to create and establish the 1998 ITP
and to permit the Trust to issue the Offered Notes secured by the 1998 ITP. The
total dollar amount of 1998 ITP authorized by the 1998 TFO is $1.634 billion,
which represents the maximum dollar amount of IFC Charges which may be imposed
and collected over time by the Servicer on behalf of the Trust without further
action by the ICC. In its application for the 1998 TFO, based on certain
assumptions set forth therein, including an assumption that the Notes will bear
interest at a rate of 7.5% per annum, Illinois Power estimated $1.277 billion as
the amount of IFC Charges which would be necessary to be billed through the
Expected Maturity Date of all Classes of Offered Notes in order to pay interest
and principal on the Offered Notes. The 1998 TFO also permits the sale of the
Offered Notes in an aggregate principal amount not to exceed $864 million. The
1998 TFO is final and is no longer subject to appeal.
The 1998 TFO creates and establishes, among other things, the 1998 ITP and
authorizes the imposition and collection of the IFC Charges, which constitute
separate nonbypassable usage-based charges expressed in cents per kilowatt-hour
payable by Customers in an aggregate amount sufficient to repay in full the
Offered Notes, fund the Overcollateralization Subaccount and pay all related
fees and expenses. The 1998 TFO entitles the Trust, as the assignee of the 1998
ITP from the Grantee, to receive the payments made pursuant to the IFC Charges
from all Customers through December 31, 2008 or, if later, until the Trust has
received IFC Collections sufficient to retire all the outstanding Offered Notes
and cover related fees and expenses. Subsequent Transitional Funding Orders may
authorize and create additional Intangible Transition Property and additions to
the IFC Charges in order to pay interest and principal on other Series of Notes
to be issued in connection therewith, together with related fees, expenses and
the Required Overcollateralization Level and Required Capital Level established
with respect to such Series of Notes.
The 1998 Authorized IFC Charges set forth in the 1998 TFO (which may be
increased by the ICC in connection with the issuance of a subsequent
Transitional Funding Order), which Illinois Power believes are higher than will
actually be required, based on certain assumptions contained in its application
for the 1998 TFO, are as follows:
<TABLE>
<CAPTION>
IFC CHARGES
IFC CUSTOMER CLASS (CENTS PER KWH)
- ----------------------------------------------------------------------------- -------------------
<S> <C>
Residential 1.74
Small Commercial 1.64
Large Commercial 1.32
Municipal 1.54
Industrial Firm 1.00
Industrial High Load Factor Firm 0.45
Industrial Non-Firm 0.26
</TABLE>
S-17
<PAGE>
As required by the Funding Law, any increase in the amount of the IFC
Charges for any of the IFC Customer Classes beyond the level of the 1998
Authorized IFC Charges for such IFC Customer Class set forth in the immediately
preceding table shall require Illinois Power or any successor Utility thereto to
file an amendatory tariff adjusting the amounts otherwise billable by Illinois
Power or such successor Utility for Applicable Rates to offset the amount of
such excess (or, if Illinois Power or such successor Utility shall have
previously filed any such amendatory tariffs, the incremental amount of such
excess).
In connection with the issuance and pricing of the Offered Notes, Illinois
Power filed the 1998 IFC Tariff with the ICC which provides for, among other
things, certain revisions to the IFC Charges. The actual initial cents per
kilowatt-hour IFC Charge payable by each of the seven (7) IFC Customer Classes
beginning on the Series Issuance Date is as follows:
<TABLE>
<CAPTION>
IFC CHARGES
IFC CUSTOMER CLASS (CENTS PER KWH)
- --------------------------------------------------------------------- -----------------------
<S> <C>
Residential
Small Commercial
Large Commercial [TO BE PROVIDED]
Municipal
Industrial Firm
Industrial High Load Factor Firm
Industrial Non-Firm
</TABLE>
ADJUSTMENTS TO INSTRUMENT FUNDING CHARGES
The Servicing Agreement and the 1998 TFO require the Servicer to calculate
and implement Adjustments to the IFC Charges which are designed to enhance the
likelihood that the IFC Collections which are remitted to the Collection Account
will be sufficient to make the Specified Payments. In addition, the IFC Charges
will be increased in connection with the issuance of additional Notes pursuant
to any subsequent Transitional Funding Order, to a level calculated to be
sufficient over time to provide for, among other things, payment of all interest
and principal in respect of all outstanding Notes.
Each Adjustment will be calculated by the Servicer within the one-month
period following the end of each Reconciliation Period. The Reconciliation
Periods for the Offered Notes will be December 1 through May 31 and June 1
through November 30. The changes in IFC Charges, if any, resulting from an
Adjustment will take effect on the first day of the second month following the
applicable Reconciliation Period (each, an "Adjustment Date"). The initial
Adjustment Date for the Offered Notes will be July 1, 1999.
See "Description of the Intangible Transition Property -- Adjustments to
Instrument Funding Charges" in the Prospectus.
S-18
<PAGE>
THE SERVICER
For a discussion of the Servicer, see "The Servicer" in the Prospectus.
SERVICING
GENERAL
The Servicer will manage, service and administer, and make collections in
respect of, the Intangible Transition Property pursuant to the Servicing
Agreement between the Servicer and the Grantee. The Servicer may not resign from
its obligations and duties under the Servicing Agreement unless certain
requirements are met. The 1998 TFO does not require approval by the ICC of such
resignation. For a detailed discussion of the Servicer's procedures, the manner
in which payments from Customers are remitted to the Collection Account, and
related matters, see "Servicing" in the Prospectus.
The Servicer will be required by law to allow an Alternative Retail Electric
Supplier ("ARES") who chooses to do so to bill customers for the services
provided by the ARES and the services provided by the Servicer, including the
IFC Charges, and thus will be required to allow such ARES to collect and remit
IFC Charges. The Servicer will have certain rights and remedies with respect to
such ARES as provided by the Amendatory Act and the 1998 TFO. See "Risk Factors
- -- Potential Servicing Issues -- Possible Payment Delays Caused by Reliance on
Alternative Retail Electric Suppliers and Other Third-Party Collectors" and
"Servicing -- Alternative Retail Electric Suppliers and Other Third-Party
Collectors" in the Prospectus.
NO SERVICER ADVANCES
The Servicer will not make any advances of interest or principal on the
Offered Notes.
SERVICING COMPENSATION
The Servicer will be entitled to receive a servicing fee on each Payment
Date, in an amount: (a) equal to $540,000, for so long as IFC Charges are billed
concurrently with charges otherwise billed by the Servicer to Customers or (b)
not to exceed $3,240,000, if IFC Charges are not billed concurrently with
charges otherwise billed by the Servicer to Customers. (Under the Servicing
Agreement, Illinois Power or any successor thereto is required to bill IFC
Charges concurrently with charges for electric service or Applicable Rates, so
long as Illinois Power or such successor is billing Customers for such electric
service or Applicable Rates.) The Servicing Fee (together with any portion of
the Servicing Fee that remains unpaid from prior Payment Dates) will be paid
solely to the extent funds are available therefor as described under "Security
for the Notes -- Allocations; Payments" in the Prospectus. The Servicing Fee
will be paid prior to the payment of any amounts in respect of interest on and
principal of the Offered Notes. The Servicer will be entitled to retain as
additional compensation net investment income on IFC Payments received by the
Servicer prior to remittance thereof to the Collection Account and the portion
of late fees, if any, paid by Customers relating to the IFC Payments.
STATEMENTS BY SERVICER
The Servicer will provide the statements and reports described under
"Servicing -- Statements by Servicer" in the Prospectus.
MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES
Illinois Power has received a ruling from the IRS holding that, among other
things, (a) the Trust's issuance of the Offered Notes will not result in gross
income to Illinois Power and (b) the Offered Notes will be obligations of
Illinois Power. See "Material United States Federal Tax Consequences" in the
Prospectus.
S-19
<PAGE>
The Indenture provides that a Noteholder and any persons holding a
beneficial interest in the Offered Notes, by acquiring any Offered Note or
interest therein, agrees to treat the Offered Note as indebtedness of Illinois
Power secured by the Note Collateral for purposes of federal, state and local
income and franchise taxes, and any other taxes imposed upon, measured by, or
based upon gross or net income, unless otherwise required by appropriate taxing
authorities.
For a discussion of material United States federal income and estate tax
consequences relevant to the purchase, ownership and disposition of the Notes by
the initial beneficial owners thereof, see "Material United States Federal Tax
Consequences" in the Prospectus.
S-20
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Trust has agreed to sell to each of the Underwriters named below (the
"Underwriters"), and each of the Underwriters, for whom Merrill Lynch, Pierce,
Fenner & Smith Incorporated is acting as representative, has severally agreed to
purchase, the respective principal amounts of the Offered Notes set forth
opposite its name below.
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4 CLASS A-5 CLASS A-6 CLASS A-7
NAME NOTES NOTES NOTES NOTES NOTES NOTES NOTES
- ---------------------------------------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..................
Salomon Smith Barney Inc................
Chase Securities Inc....................
Donaldson, Lufkin & Jenrette Securities
Corporation...........................
First Chicago Capital Markets, Inc......
NationsBanc Montgomery Securities LLC...
ABN AMRO Incorporated...................
A.G. Edwards & Sons, Inc................
J.P. Morgan Securities Inc..............
Loop Capital Markets, LLC...............
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total................................... $ $ $ $ $ $ $
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and to pay for all of the Offered Notes
offered hereby, if any are taken.
The Underwriters propose to offer the Offered Notes in part directly to the
public at the initial public offering price set forth on the cover page of this
Prospectus Supplement, and in part to certain securities dealers at such price
less a concession not in excess of percent of the principal amount of the
Class A-1 Notes, percent of the principal amount of the Class A-2 Notes,
percent of the principal amount of the Class A-3 Notes, percent of the
principal amount of the Class A-4 Notes,
percent of the principal amount of the Class A-5 Notes, percent of the
principal amount of the Class A-6 Notes, and percent of the principal amount
of the Class A-7 Notes. The Underwriters may allow and such dealers may reallow
a concession, not in excess of percent of the principal amount of the Class
A-1 Notes, percent of the principal amount of the Class A-2 Notes,
percent of the principal amount of the Class A-3 Notes, percent of the
principal amount of the Class A-4 Notes, percent of the principal amount of
the Class A-5 Notes, percent of the principal amount of the Class A-6 Notes,
and percent of the principal amount of the Class A-7 Notes. After the
Offered Notes are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the Underwriters.
The Offered Notes are a new issue of securities with no established trading
market. The Offered Notes will not be listed on any securities exchange. The
Trust has been advised by the Underwriters that they intend to make a market in
the Offered Notes but are not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for the Offered Notes.
In connection with the offering, the Underwriters may purchase and sell the
Offered Notes in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created in connection with the offering. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the Offered Notes; and syndicate short positions involve
the sale by the Underwriters of a greater number of Offered Notes than they are
required to purchase from the Trust in the offering. The Underwriters also may
impose a penalty bid, whereby selling concessions allowed to syndicate members
or other broker-
S-21
<PAGE>
dealers in respect of the Offered Notes sold in the offering for their account
may be reclaimed by the syndicate if such Offered Notes are repurchased by the
syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Offered Notes,
which may be higher than the price that might otherwise prevail in the open
market; and these activities, if commenced, may be discontinued at any time.
Under the terms of the Underwriting Agreement, the Trust has agreed to
reimburse the Underwriters for certain expenses.
The Grantee and Illinois Power have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act.
RATINGS
It is a condition of issuance of the Offered Notes that the Offered Notes be
rated [ ] by Duff & Phelps Credit Rating Company, [ ] by Fitch IBCA,
Inc., [ ] by Moody's Investors Service, Inc. and [ ] by Standard &
Poor's, a division of The McGraw-Hill Companies, Inc. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision or
withdrawal at any time by the assigning Rating Agency. No person is obligated to
maintain the rating on any Offered Note, and, accordingly, there can be no
assurance that the ratings assigned to any Class of Offered Notes upon initial
issuance will not be revised or withdrawn by a Rating Agency at any time
thereafter. If a rating of any Class of Offered Notes is revised or withdrawn,
the liquidity of such Class of Offered Notes may be adversely affected. In
general, ratings address credit risk and do not represent any assessment of the
rate of principal payments.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Offered Notes will be
passed upon for the Trust by Schiff Hardin & Waite, Chicago, Illinois, counsel
to Illinois Power and for the Underwriters by Brown & Wood LLP, New York, New
York. Certain legal matters relating to the United States federal tax
consequences of the issuance of the Offered Notes will be passed upon for the
Trust by Mayer Brown & Platt, Chicago, Illinois, counsel to Illinois Power.
Certain legal matters relating to the Trust will be passed upon for the Trust by
Richards, Layton & Finger, P.A., Wilmington, Delaware.
S-22
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
Set forth below is a list of the defined terms used in this Prospectus
Supplement and defined herein and the pages on which the definitions of such
terms may be found herein. Certain defined terms used in this Prospectus
Supplement are defined in the Prospectus. See "Index of Principal Definitions"
in the Prospectus.
<TABLE>
<CAPTION>
DEFINED TERM DEFINED ON PAGE
- ------------------------------------------------------------------------------------------------- ---------------
<S> <C>
1998 Authorized IFC Charges...................................................................... S-7
1998 IFC Tariff.................................................................................. S-7
1998 ITP......................................................................................... S-6
1998 TFO......................................................................................... S-4
Adjustment Date.................................................................................. S-18
Administration Agreement......................................................................... S-6
Administrator.................................................................................... S-6
ARES............................................................................................. S-19
Book-Entry Note.................................................................................. S-12
Capital Subaccount............................................................................... S-10
Cede............................................................................................. S-12
Class............................................................................................ S-5
Class Principal Balance.......................................................................... S-5
Code............................................................................................. S-13
Commission....................................................................................... S-3
Customers........................................................................................ S-7
Delaware Trustee................................................................................. S-6
DTC.............................................................................................. S-3
ERISA............................................................................................ S-13
Exchange Act..................................................................................... S-3
Expected Maturity Date........................................................................... S-8
Final Maturity Date.............................................................................. S-8
General Subaccount............................................................................... S-10
Grantee.......................................................................................... S-3
Illinois Power................................................................................... S-6
Indenture Trustee................................................................................ S-6
IRS.............................................................................................. S-12
Note Interest Rate............................................................................... S-14
Noteholders...................................................................................... S-3
Notes............................................................................................ S-14
Offered Notes.................................................................................... S-4
Original Note Principal Balance.................................................................. S-5
Overcollateralization Amount..................................................................... S-16
Overcollateralization Subaccount................................................................. S-10
Payment Date..................................................................................... S-2, S-8
Prospectus....................................................................................... S-2
Rating Agencies.................................................................................. S-12
Rating Agency.................................................................................... S-12
Record Date...................................................................................... S-8
Required Overcollateralization Level............................................................. S-10
Reserve Subaccount............................................................................... S-10
</TABLE>
S-23
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM DEFINED ON PAGE
- ------------------------------------------------------------------------------------------------- ---------------
<S> <C>
Series Issuance Date............................................................................. S-4
Servicer......................................................................................... S-6
Servicing Fee.................................................................................... S-11
Specified Payments............................................................................... S-5
Trust............................................................................................ S-6
Trust Agreement.................................................................................. S-6
Underwriters..................................................................................... S-21
</TABLE>
(THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK)
S-24
<PAGE>
PROSPECTUS
ILLINOIS POWER SPECIAL PURPOSE TRUST
TRANSITIONAL FUNDING TRUST NOTES
ISSUABLE IN SERIES
----------------
ILLINOIS POWER COMPANY
SERVICER
---------------
The Illinois Power Special Purpose Trust Transitional Funding Trust Notes
(the "Notes") offered hereby in an aggregate principal amount of up to
$864,000,000 may be sold from time to time in series (each, a "Series"), each of
which may be comprised of one or more classes (each, a "Class"), as described in
the related Prospectus Supplement. Each Series of Notes will be issued by the
Illinois Power Special Purpose Trust (the "Trust"), a Delaware business trust to
be created under a Declaration of Trust (the "Trust Agreement"), by and among a
Delaware trustee (the "Delaware Trustee") and Beneficiary Trustees to be named
in the related Prospectus Supplement. (CONTINUED ON FOLLOWING PAGE)
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
PROSPECTIVE INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION
SET FORTH UNDER THE CAPTION "RISK FACTORS," WHICH BEGINS ON PAGE 29 HEREIN.
THE NOTES OFFERED HEREBY DO NOT CONSTITUTE A DEBT, LIABILITY OR OTHER
OBLIGATION OF THE STATE OF ILLINOIS OR OF ANY POLITICAL SUBDIVISION, AGENCY OR
INSTRUMENTALITY THEREOF AND DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF
ILLINOIS POWER COMPANY OR ANY OF ITS AFFILIATES. NONE OF THE NOTES OR THE
UNDERLYING INTANGIBLE TRANSITION PROPERTY WILL BE GUARANTEED OR INSURED BY
ILLINOIS POWER COMPANY OR ITS AFFILIATES.
THE INTANGIBLE TRANSITION PROPERTY ASSIGNED TO THE TRUST BY THE GRANTEE,
CERTAIN OTHER ASSETS OF THE TRUST AND PAYMENTS ON ANY RELATED SWAP AGREEMENT
(SOLELY WITH RESPECT TO CLASSES OF NOTES BEARING INTEREST AT FLOATING RATES),
WILL BE THE SOLE SOURCE OF PAYMENTS ON THE NOTES. NEITHER ILLINOIS POWER COMPANY
NOR ANY OF ITS AFFILIATES WILL HAVE ANY OBLIGATIONS IN RESPECT OF THE NOTES OR
THE INTANGIBLE TRANSITION PROPERTY, EXCEPT AS EXPRESSLY SET FORTH HEREIN OR IN
THE RELATED PROSPECTUS SUPPLEMENT.
TRANSITIONAL FUNDING ORDERS AUTHORIZING THE ISSUANCE OF THE NOTES DO NOT
CONSTITUTE A PLEDGE OF THE FULL FAITH AND CREDIT OF THE STATE OF ILLINOIS OR OF
ANY OF ITS POLITICAL SUBDIVISIONS. THE ISSUANCE OF THE NOTES UNDER THE FUNDING
LAW SHALL NOT DIRECTLY, INDIRECTLY OR CONTINGENTLY OBLIGATE THE STATE OF
ILLINOIS OR ANY POLITICAL SUBDIVISION THEREOF TO LEVY OR TO PLEDGE ANY FORM OF
TAXATION THEREFOR OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES OFFERED
HEREBY UNLESS ACCOMPANIED BY THE RELATED PROSPECTUS SUPPLEMENT.
Prospective investors should refer to the "Index of Principal Definitions"
which begins on page 121 herein for the location of the definitions of
capitalized terms that appear in this Prospectus.
December , 1998.
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
The Notes will be secured primarily by the Intangible Transition Property,
as described under "Prospectus Summary--Intangible Transition Property" and
"Description of the Intangible Transition Property." The Intangible Transition
Property, among other things, will represent a current right to receive certain
nonbypassable usage-based per kilowatt-hour charges to be imposed against
certain customers of Illinois Power Company. Collection of these charges will be
the primary source of payment of principal and interest on the Notes.
The Trust will issue to investors separate Series of Notes from time to time
upon terms determined at the time of sale and described in the related
Prospectus Supplement. Each Series may be issuable in one or more Classes. A
Series may include Classes which differ as to the interest rate, timing,
sequential order and amount of distributions of principal or interest, or both,
or otherwise. As more specifically described under "Security for the
Notes--Allocations; Payments," the Trust will use all payments made with respect
to Intangible Transition Property (including net investment earnings thereon) to
pay certain expenses described in this Prospectus, interest due on the Notes and
principal payable on the Notes, allocated among the Series and Classes of Notes
based on the priorities described in this Prospectus and in the related
Prospectus Supplement, except that investment earnings on amounts on deposit in
the Collection Account shall, to the extent such amounts are not otherwise
required to make other payments described herein, or in the related Prospectus
Supplement, be paid to the Trust or as it directs. All principal not previously
paid, if any, on any Note will be due and payable on the Final Maturity Date of
such Note. While the specific terms of any Series of Notes (and the Classes, if
any, thereof) will be described in the related Prospectus Supplement, the terms
of such Series and any Classes thereof will not be subject to prior review by,
or consent of, the holders of the Notes of any previously issued Series.
Offers of the Notes of a Series may be made through one or more different
methods, including offerings through underwriters, as described under "Plan of
Distribution" herein and "Underwriting" in the related Prospectus Supplement.
There will have been no secondary market for the Notes of any Series prior to
the offering thereof. There can be no assurance that a secondary market for any
Series of Notes will develop or, if one does develop, that it will continue. It
is not anticipated that any of the Notes will be listed on any securities
exchange.
No dealer, salesperson, or any other person has been authorized to give any
information, or to make any representations, other than those contained in this
Prospectus or the related Prospectus Supplement and, if given or made, such
information or representations must not be relied upon as having been authorized
by Illinois Power, the Trust, the Grantee or any dealer, salesperson, or any
other person. Neither the delivery of this Prospectus or the related Prospectus
Supplement nor any sale made hereunder or thereunder shall under any
circumstances create an implication that there has been no change in the
information herein or therein since the date hereof. This Prospectus and the
related Prospectus Supplement do not constitute an offer to sell or a
solicitation of an offer to buy any security in any jurisdiction in which it is
unlawful to make such offer or solicitation.
UNTIL 90 DAYS AFTER THE DATE OF EACH PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE RELATED SERIES OF NOTES, WHETHER OR NOT
PARTICIPATING IN THE DISTRIBUTION THEREOF, MAY BE REQUIRED TO DELIVER THIS
PROSPECTUS AND THE RELATED PROSPECTUS SUPPLEMENT. THIS DELIVERY REQUIREMENT IS
IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
AVAILABLE INFORMATION
The Grantee has filed with the Securities and Exchange Commission (the
"Commission") a registration statement (as amended, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Notes. This Prospectus, which forms a part of the
Registration
2
<PAGE>
Statement, and any Prospectus Supplement describe all material terms of each
document filed as an exhibit to the Registration Statement; however, this
Prospectus and any Prospectus Supplement do not contain all of the information
contained in the Registration Statement and the exhibits thereto. Any statements
contained herein concerning the provisions of any document filed as an exhibit
to the Registration Statement or otherwise filed with the Commission are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed. Each such statement is qualified in its entirety by such
reference. For further information, reference is made to the Registration
Statement and the exhibits thereto, which are available for inspection without
charge at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and at its regional offices located
as follows: Chicago Regional Office, Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511; and New York Regional Office, 7 World
Trade Center, 13th Floor, New York, New York 10048. Copies of the Registration
Statement and exhibits thereto may be obtained at the above locations at
prescribed rates. Information filed with the Commission can also be inspected at
the Commission's site on the World Wide Web at http://www.sec.gov.
The Grantee will file with the SEC such periodic reports with respect to
each Series of Notes as are required by the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules, regulations or orders of the SEC
thereunder. The Grantee may discontinue filing periodic reports under the
Exchange Act at the beginning of the fiscal year following the issuance of the
Notes of any Series if there are fewer than 300 holders of such Notes.
REPORTS TO HOLDERS
Unless and until the Notes are no longer issued in book-entry form, the
Servicer will provide to Cede & Co. ("Cede"), as nominee of The Depository Trust
Company ("DTC") and registered holder of the Notes, and, upon request, to
Participants of DTC, periodic reports concerning the Notes. See "Security for
the Notes--Reports to Noteholders." Such reports may be made available to the
holders of interests in the Notes (the "Noteholders") upon request to their
Participants. Such reports will not constitute financial statements prepared in
accordance with generally accepted accounting principles. The financial
information provided to Noteholders will not be examined and reported upon, nor
will an opinion thereon be provided, by any independent public accountant.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Grantee pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering made hereby shall be
deemed to be incorporated by reference in this Prospectus and to be part hereof.
Any statement contained herein or in a Prospectus Supplement, or in a document
incorporated or deemed to be incorporated by reference herein or therein shall
be deemed to be modified or superseded for purposes of this Prospectus and any
Prospectus Supplement to the extent that a statement contained herein or in any
other subsequently filed document that also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus or any Prospectus Supplement.
The Grantee will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such person,
a copy of any of or all the documents incorporated herein by reference (other
than exhibits to such documents). Requests for such copies should be directed to
the Grantee at Illinois Power Securitization Limited Liability Company at 500
South 27th Street, Decatur, Illinois 62521, or by telephone at (217) 424-7568,
Attention: Daniel L. Mortland.
3
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement for a Series of Notes will describe, among other
things, the following terms of such Series and, if applicable, the Classes
thereof: (a) the designation of the Series and, if applicable, the Classes
thereof, (b) the principal amount, (c) the annual rate at which interest
accrues, or if the Trust has entered into a Swap Agreement with respect to such
Series, the index on which a variable rate of interest will be based, (d) the
dates on which payments of interest and principal are scheduled to occur, (e)
the Expected Maturity Date and the Final Maturity Date of such Series, (f) the
initial Adjustment Date of, and the Reconciliation Period for such Series, (g)
the issuance date of the Series, (h) the place or places for the payment of
principal and interest, (i) the authorized denominations, (j) the provisions for
optional redemption of such Series or Class by the Trust, (k) the Expected
Amortization Schedule for principal of such Series and, if applicable, the
Classes thereof, (l) the initial IFC Charges authorized in connection with the
issuance of such Series by the related Transitional Funding Order, and the IFC
Charges imposed as of the date of issuance of such Series, (m) the total dollar
amount of Intangible Transition Property authorized by the related Transitional
Funding Order, (n) any other material terms of such Series and any Class thereof
that are not inconsistent with the provisions of the Notes and that will not
result in any Rating Agency reducing or withdrawing its then current rating of
any outstanding Series or Class of Notes, (o) the identity of the Indenture
Trustee, the Delaware Trustee and the Beneficiary Trustees, and (p) the terms of
any Swap Agreement executed solely to permit the issuance of Floating Rate Notes
and the identity of any Swap Counterparty related thereto.
4
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PROSPECTUS SUMMARY......................................................................................... 9
RISK FACTORS............................................................................................... 29
Uncertainties Associated with Unusual Asset Type......................................................... 29
Legal Challenges Which Could Adversely Affect Noteholders................................................ 29
Possible Payment Delays or Losses as a Result of Amendment or Repeal of Amendatory Act or Breach of State
Pledge................................................................................................. 30
Limit on Amount of Intangible Transition Property Available to Pay Notes................................. 31
Potential Servicing Issues............................................................................... 31
Reliance on Illinois Power as Servicer................................................................. 31
Possible Payment Delays Caused by Inaccurate Usage and Credit Projections.............................. 32
Possible Payment Delays Caused by Changes in Payment Terms of Customers................................ 32
Limited Information Regarding Customers................................................................ 32
Possible Payment Delays Caused by Reliance on Alternative Retail Electric Suppliers and Other
Third-Party Collectors................................................................................ 33
Possible Payment Delays Caused by Commingling of IFC Payments With Servicer's Other Funds.............. 33
Possible Payment Delays as a Result of Year 2000 Issues--Year 2000 Readiness Disclosure................ 34
Uncertainties Related to the Electric Industry Generally................................................. 34
Untried New Illinois Market Structure.................................................................. 34
Shrinking Customer Base as a Result of Technological Change............................................ 35
Shrinking Customer Base as a Result of Municipalization................................................ 36
Possible Payment Delays Caused by Changes in General Economic Conditions and Electricity Usage......... 36
Uncertainties Caused by Changing Regulatory and Legislative Environment.................................. 37
Reduction in Amount of Revenue From Applicable Rates..................................................... 37
Bankruptcy and Creditors' Rights Issues.................................................................. 40
Possible Adverse Effect on Noteholders as a Result of the Bankruptcy of Illinois Power, the Grantee or
the Trust............................................................................................. 40
Possible Adverse Effect on Noteholders as a Result of the Bankruptcy of the Servicer................... 42
Nature of the Notes...................................................................................... 43
Limited Liquidity...................................................................................... 43
Restrictions on Book-Entry Registration................................................................ 43
Limited Sources of Payment for the Notes and Limited Credit Enhancement................................ 43
Effect of Additional Series of Notes or Other Transitional Funding Orders on Outstanding Notes......... 44
Limited Nature of Ratings.............................................................................. 44
Uncertain Payment Amounts and Weighted Average Life.................................................... 45
Effect of Optional Redemption on Weighted Average Life and Yield....................................... 45
Additional Risks of Floating Rate Notes................................................................ 45
ELECTRIC INDUSTRY RESTRUCTURING IN ILLINOIS................................................................ 46
General.................................................................................................. 46
Amendatory Act Overview.................................................................................. 46
Transition Charges....................................................................................... 46
Transition Period........................................................................................ 48
Alternative Retail Electric Suppliers.................................................................... 49
Competitive Services..................................................................................... 49
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Federal Initiatives; Increased Competition............................................................... 50
DESCRIPTION OF THE INTANGIBLE TRANSITION PROPERTY.......................................................... 50
Creation of Intangible Transition Property Under the Funding Law......................................... 50
Limitations on the Amounts of Transitional Funding Instruments, Intangible Transition Property and
Instrument Funding Charges Which Can Be Authorized; Permitted Use of Proceeds.......................... 52
Imposition and Collection of Instrument Funding Charges; Adjustment Mechanism............................ 53
The Transitional Funding Order Issued at the Request of Illinois Power................................... 54
Transactions Pursuant to the Transitional Funding Order.................................................. 56
Nonbypassable IFC Charges................................................................................ 57
Adjustments to IFC Charges............................................................................... 57
Sale and Assignment of Intangible Transition Property.................................................... 58
Grant Agreement.......................................................................................... 59
Representations and Warranties of Illinois Power....................................................... 60
Covenants of Illinois Power............................................................................ 62
Amendment of Grant Agreements.......................................................................... 64
Indemnification Obligations of Illinois Power.......................................................... 64
Sale Agreement........................................................................................... 65
Representations and Warranties of the Grantee.......................................................... 65
Covenants of the Grantee............................................................................... 67
Amendment of Sale Agreements........................................................................... 68
Indemnification Obligations of the Grantee............................................................. 69
CERTAIN PAYMENT, WEIGHTED AVERAGE LIFE AND YIELD CONSIDERATIONS............................................ 70
THE TRUST.................................................................................................. 71
THE GRANTEE................................................................................................ 72
Managers and Officers.................................................................................... 73
THE SERVICER............................................................................................... 74
General.................................................................................................. 74
Illinois Power Customer Base, Electric Energy Consumption and Base Rates................................. 74
Forecasting Electricity Consumption...................................................................... 77
Forecast Variances....................................................................................... 78
Credit Policy; Billing; Collections; Restoration of Service.............................................. 79
Credit Policy.......................................................................................... 79
Billing Process........................................................................................ 79
Collection Process..................................................................................... 80
Restoration of Service................................................................................. 81
Loss and Delinquency Experience.......................................................................... 81
Delinquencies............................................................................................ 82
Year 2000 Issues--Year 2000 Readiness Disclosure......................................................... 83
SERVICING.................................................................................................. 84
Servicing Procedures..................................................................................... 84
Servicing Standards and Covenants........................................................................ 85
Remittances to Collection Account........................................................................ 86
No Servicer Advances..................................................................................... 87
Servicing Compensation................................................................................... 87
Alternative Retail Electric Suppliers and Other Third-Party Collectors................................... 87
Servicer Representations and Warranties.................................................................. 89
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Statements by Servicer................................................................................... 89
Evidence as to Compliance................................................................................ 89
Certain Matters Regarding the Servicer................................................................... 90
Servicer Defaults........................................................................................ 90
Rights Upon Servicer Default............................................................................. 91
Waiver of Past Defaults.................................................................................. 91
Successor Servicer....................................................................................... 91
Amendment................................................................................................ 92
Termination.............................................................................................. 92
DESCRIPTION OF THE NOTES................................................................................... 92
General.................................................................................................. 92
Interest and Principal................................................................................... 93
Payments on the Notes.................................................................................... 94
Floating Rate Notes...................................................................................... 95
No Third-Party Credit Enhancement........................................................................ 95
Registration and Transfer of the Notes................................................................... 95
Book-Entry Registration.................................................................................. 96
Definitive Notes......................................................................................... 98
Optional Redemption...................................................................................... 99
Conditions of Issuance of Additional Series and Acquisition of Subsequent Intangible Transition
Property............................................................................................... 100
List of Noteholders...................................................................................... 100
SECURITY FOR THE NOTES..................................................................................... 101
General.................................................................................................. 101
Pledge of Note Collateral................................................................................ 101
Security Interest in Note Collateral..................................................................... 101
Creation and Perfection of Security Interest in Intangible Transition Property Under the Funding Law... 101
Right of Foreclosure................................................................................... 102
Filings Made With Respect to the Intangible Transition Property........................................ 102
Security Interest in Additional Note Collateral.......................................................... 102
Description of Indenture Accounts........................................................................ 103
Collection Account..................................................................................... 103
General Subaccount..................................................................................... 103
Reserve Subaccount..................................................................................... 104
Overcollateralization Subaccount....................................................................... 104
Capital Subaccount..................................................................................... 104
Allocations; Payments.................................................................................... 104
State Pledge............................................................................................. 106
Reports to Noteholders................................................................................... 106
Supplemental Indentures.................................................................................. 107
Certain Covenants of the Delaware Trustee and the Trust.................................................. 107
Events of Default; Rights Upon Event of Default.......................................................... 109
Actions by Noteholders................................................................................... 111
Annual Compliance Statement.............................................................................. 111
MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES............................................................ 111
Tax Consequences to United States Noteholders............................................................ 112
United States Noteholder............................................................................... 112
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Payments of Interest................................................................................... 112
Original Issue Discount................................................................................ 112
Market Discount and Premium............................................................................ 113
Sale, Exchanges, Redemption or Retirement of the Notes................................................. 113
Tax Consequences to Non-United States Noteholders........................................................ 113
Backup Withholding and Information Reporting............................................................. 115
ERISA CONSIDERATIONS....................................................................................... 117
USE OF PROCEEDS............................................................................................ 119
PLAN OF DISTRIBUTION....................................................................................... 119
RATINGS.................................................................................................... 120
LEGAL MATTERS.............................................................................................. 120
EXPERTS.................................................................................................... 120
INDEX OF PRINCIPAL DEFINITIONS............................................................................. 121
INDEX OF FINANCIAL STATEMENTS.............................................................................. F-1
</TABLE>
8
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING PROSPECTUS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO THE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS AND BY
REFERENCE TO THE INFORMATION WITH RESPECT TO EACH SERIES OF NOTES CONTAINED IN
THE RELATED PROSPECTUS SUPPLEMENT. CAPITALIZED TERMS USED BUT NOT DEFINED IN
THIS PROSPECTUS SUMMARY HAVE THE MEANINGS ASCRIBED TO SUCH TERMS ELSEWHERE IN
THIS PROSPECTUS. THE INDEX OF PRINCIPAL DEFINITIONS WHICH BEGINS ON PAGE 121
SETS FORTH THE PAGES ON WHICH THE DEFINITIONS OF CERTAIN PRINCIPAL TERMS APPEAR.
<TABLE>
<S> <C>
Transaction Overview.............. The Illinois Electric Utility Transitional Funding Law
of 1997 (the "Funding Law") permits Illinois electric
utilities (each, a "Utility", and collectively, the
"Utilities"), including Illinois Power Company, an
Illinois corporation ("Illinois Power"), and other
permitted issuers, including the Trust, to issue
transitional funding instruments, such as the
Transitional Funding Trust Notes (the "Notes"). The
Funding Law was one portion of Public Act 90-561 (the
"Amendatory Act") which amended the Illinois Public
Utilities Act (as so amended, the "Act") and became law
on December 16, 1997.
Pursuant to the Funding Law, the Illinois Commerce
Commission (the "ICC") has issued and may hereafter
issue one or more Transitional Funding Orders in favor
of the Grantee at the request of Illinois Power each of
which provides, or will provide, among other things, for
the creation of Intangible Transition Property and the
vesting thereof in the Grantee. The Intangible
Transition Property created by each Transitional Funding
Order, among other things, represents the right to
impose and receive certain nonbypassable usage-based
charges (expressed in cents per kilowatt-hour) from
Customers, and all related revenues, collections,
claims, payments, money or proceeds thereof. These
charges are nonbypassable in that Customers cannot avoid
paying them regardless of from whom their electricity is
purchased; provided, however, that such charges must be
deducted from amounts which could otherwise be billed by
Illinois Power (or its successor) or other provider of
electric service to such Customers on account of its
tariffed rates (or, in the case of Customers not taking
tariffed services on account of private contracts, from
the charges and rates for the equivalent services
provided by Illinois Power). Illinois Power will enter
into one or more Agreements Relating to Grant of
Intangible Transition Property (each, a "Grant
Agreement" and collectively, the "Grant Agreements"),
relating to the grant by the ICC to the Grantee of all
of the rights in and to the Intangible Transition
Property created by the related Transitional Funding
Order and containing certain representations, warranties
and covenants with respect to such Intangible Transition
Property.
Pursuant to one or more Intangible Transition Property
Sale Agreements between the Grantee and the Trust (each,
a "Sale Agreement" and collectively, the "Sale
Agreements"), the
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Grantee has assigned or may further assign its rights
in, to and under the Intangible Transition Property
created by the related Transitional Funding Order, the
Servicing Agreement and certain other related assets to
the Trust. The Trust, whose primary asset will be all of
the Intangible Transition Property transferred to the
Trust pursuant to the Sale Agreements, will issue the
Notes, which will be sold to the underwriters named in
each Prospectus Supplement.
The Notes will be secured primarily by all of the
Intangible Transition Property. The Notes also will be
secured by the Grant Agreements, the Sale Agreements and
the Intangible Transition Property Servicing Agreement
between the Servicer and the Grantee (the "Servicing
Agreement"); the Collection Account and all amounts of
cash or investment property on deposit therein or
credited thereto from time to time; with respect to
Floating Rate Notes only, any interest rate exchange
agreements (each, a "Swap Agreement") entered into with
respect to the issuance of such Floating Rate Notes; all
rights to compel Illinois Power, as Servicer (or any
successor) to file for and obtain adjustments to the IFC
Charges in accordance with Section 18-104(d) of the Act;
the Transitional Funding Orders and all tariffs filed
with the ICC in connection therewith (each, an "IFC
Tariff"); all present and future claims, demands, causes
and choses in action in respect of any or all of the
foregoing; and all payments on or under and all proceeds
in respect of any or all of the foregoing. See "Security
for the Notes."
The IFC Charges will be calculated and adjusted from
time to time to generate projected revenues expected to
be sufficient over time to (a) pay interest and make
Scheduled Payments on the Notes, (b) pay all related
fees and expenses of the Trust and the Grantee,
including the Servicing Fee and any Administration Fee,
(c) replenish the Capital Subaccount up to the Required
Capital Level, and (d) fund and maintain the
Overcollateralization Subaccount up to the Required
Overcollateralization Level. These payments are
collectively referred to herein as the "Specified
Payments."
To enhance the likelihood of timely recovery of the
amounts necessary to make the Specified Payments, the
IFC Charges may be adjusted from time to time through
Adjustments, as described under "Description of the
Intangible Transition Property--Adjustments to IFC
Charges" over the term of each Series of Notes.
The following diagram represents a general summary of
the parties to the transactions contemplated hereby,
their roles and their various relationship to the other
parties.
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Risk Factors...................... Investors should consider the risks associated with an
investment in the Notes. For a discussion of certain
material risks associated therewith, investors should
review the discussion under "Risk Factors" which begins
on page 29.
Servicer/Administrator............ Illinois Power, a subsidiary of Illinova Corporation, an
Illinois corporation ("Illinova"), will act as the
initial servicer (in such capacity, and together with
any successor servicer, the "Servicer") of the
Intangible Transition Property pursuant to the terms of
the Servicing Agreement, and as the initial
administrator (in such capacity, and together with any
successor administrator, the "Administrator") of the
Grantee pursuant to the terms of an Administration
Agreement between the Grantee and the Administrator (the
"Administration Agreement").
Illinois Power is a public utility primarily engaged in
the business of generating, transmitting and
distributing electric energy to customers in areas of
central and southwestern Illinois, including the cities
of Bloomington, Normal, Galesburg, Decatur,
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Champaign, Urbana, Danville, Centralia, Belleville,
Edwardsville and Granite City. See "The Servicer."
Grantee........................... The grantee of the Intangible Transition Property will
be Illinois Power Securitization Limited Liability
Company, a special purpose Delaware limited liability
company (the "Grantee"), whose sole member is Illinois
Power. In accordance with the Funding Law and each
Transitional Funding Order, the Grantee shall be a
grantee of the Intangible Transition Property,
authorized to assign such Intangible Transition Property
to the Trust as an assignee. Pursuant to a Sale
Agreement, the Grantee will sell and assign all of its
right, title and interest in the Intangible Transition
Property, the Servicing Agreement and certain other
related assets to the Trust.
Trust............................. The issuer of the Notes will be the Illinois Power
Special Purpose Trust (the "Trust"), a Delaware business
trust. In accordance with the Funding Law and the
related Transitional Funding Order, the Trust shall be
entitled to receive the Intangible Transition Property
created by such Transitional Funding Order as assignee
of the Grantee, and shall be authorized to issue Notes
as transitional funding instruments.
Trust Assets...................... The assets of the Trust will consist of the Intangible
Transition Property and the other Note Collateral,
including proceeds of the issuance retained by the Trust
in an amount specified in each Prospectus Supplement
which will be sufficient to meet certain reserve
requirements of the Indenture (the "Indenture") between
the Trust and the Indenture Trustee.
Delaware Trustee.................. A Delaware entity (the "Delaware Trustee") shall be
named as trustee under the Declaration of Trust (the
"Trust Agreement"), as set forth in each Prospectus
Supplement. The Delaware Trustee will manage the Trust
pursuant to the Trust Agreement.
Beneficiary Trustees.............. The individuals named in the related Prospectus
Supplement as Beneficiary Trustees shall serve as
Beneficiary Trustees (each, a "Beneficiary Trustee") of
the Trust. The Beneficiary Trustees will execute and
file the Registration Statement and certain related
documents, register the Notes with the applicable state
securities commissions and take other necessary or
appropriate related actions.
The Notes......................... The Notes will be issued in series (each, a "Series"),
and each Series of Notes may be issued in one or more
classes (each, a "Class"). Each Series and Class of
Notes will be in an initial aggregate principal amount,
and will bear interest at a rate described in the
related Prospectus Supplement and will be at least PARI
PASSU in right of payment with any subsequent Series and
Class of Notes. The Notes will be issued under the
Indenture.
The Indenture provides that collections received with
respect to the Intangible Transition Property ("IFC
Collections") will be
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used, among other things, to pay (a) fees payable to the
Delaware Trustee, the Indenture Trustee, the Servicer
and the Administrator; (b) all other fees, costs,
expenses and indemnities of the Trust (together with the
fees described in (a) above, "Operating Expenses"); and
(c) interest (including amounts, if any, payable with
respect to any Swap Agreement entered into with respect
to the issuance of any Floating Rate Notes) due on the
Notes and principal payable on the Notes, allocated
among the Series and Classes of Notes based on the
priorities described herein and in the related
Prospectus Supplement, until each outstanding Series and
Class of Notes is retired. However, as described under
"Description of the Notes--Interest and Principal,"
unless an Event of Default has occurred and is
continuing and the Notes have been declared due and
payable, principal on the Notes on any Payment Date will
only be paid until the outstanding principal balance of
the Notes has been reduced to the principal balance
specified in the Expected Amortization Schedule for such
Payment Date. To the extent that, with respect to any
Payment Date, amounts on deposit in certain subaccounts
of the Collection Account are insufficient to reduce the
principal balance of the Notes to the amount required
pursuant to the Expected Amortization Schedule on such
Payment Date, the amount of such deficiency will be
deferred to a subsequent Payment Date without a default
occurring under the Indenture. All principal not
previously paid, if any, on a Note is due and payable on
the Final Maturity Date of such Note.
Each Series of Notes is non-recourse and will be secured
only by and payable solely out of the proceeds of
Intangible Transition Property owned by the Trust,
together with the other Note Collateral. If additional
Notes are subsequently issued, the previously issued and
outstanding Notes will be at least PARI PASSU with such
subsequently issued Notes as to all of the Intangible
Transition Property and the other Note Collateral. Any
and all funds or property released by the Indenture
Trustee pursuant to the Indenture will cease to be Note
Collateral and will no longer be available for payment
of the Notes. See "Description of the Notes" and
"Security for the Notes."
A Series of Notes may include two or more Classes of
Notes that differ as to the interest rate, timing,
sequential order and amount of distributions of
principal or interest or both or otherwise.
In addition, a Series of Notes may include one or more
Classes of Notes that accrue interest at a variable rate
based on the index described in the related Prospectus
Supplement (the "Floating Rate Notes"). See "Description
of the Notes-- Floating Rate Notes."
While the specific terms of any Series of Notes (and the
Classes thereof, if any) will be described in the
related Prospectus
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Supplement, the terms of such Series and any Classes
thereof will not be subject to prior review by, or
consent of, the Noteholders of any previously issued
Series of Notes.
All Notes of the same Series will be identical in all
respects except for the denominations thereof, unless
such Series is comprised of two or more Classes, in
which case all Notes of the same Class will be identical
in all respects except for the denominations thereof.
No additional Notes will be issued or shall be secured,
directly or indirectly, by the Intangible Transition
Property and the other Note Collateral unless, among
other things, each Rating Agency with respect to any
outstanding Notes shall have affirmed the then current
rating of all such outstanding Notes in connection with
the issuance of such additional Notes.
So long as any Notes are outstanding, the Noteholders
will direct the Indenture Trustee as to matters in which
the Noteholders are permitted or required to take
action; provided, however, that the Indenture Trustee
will be permitted to take certain actions specified in
the Indenture without the direction of all of the
Noteholders. See "Security for the Notes--Actions by
Noteholders."
None of the Notes or the underlying Intangible
Transition Property will be guaranteed or insured by
Illinois Power or any of its affiliates. Transitional
Funding Orders authorizing the issuance of the Notes do
not constitute a pledge of the full faith and credit of
the State of Illinois or any of its political
subdivisions. The issuance of the Notes under the
Funding Law shall not directly, indirectly or
contingently obligate the State of Illinois or any
political subdivision thereof to levy or to pledge any
form of taxation therefor or to make any appropriation
for their payment. See "Description of the Notes."
Indenture......................... The Notes will be issued pursuant to the terms of the
Indenture, and Intangible Transition Property and the
other Note Collateral will be pledged under the
Indenture for the benefit of the Noteholders.
Indenture Trustee................. The entity named as trustee under the Indenture, as set
forth in each Prospectus Supplement (the "Indenture
Trustee"). The Indenture Trustee acts for and on behalf
of the Noteholders pursuant to the Indenture.
Rating Agency..................... Each nationally-recognized securities rating
organization which rates any Series of Notes upon
request of the Trust (each, a "Rating Agency" and
collectively, the "Rating Agencies") as set forth in the
Prospectus Supplement related thereto.
Transitional Funding Orders....... The ICC has issued and may hereafter issue one or more
financing orders in favor of the Grantee at the request
of Illinois Power (each a "Transitional Funding Order").
Each Transitional Funding Order will provide for, among
other things, the creation of Intangible Transition
Property and the vesting thereof in the
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Grantee. Although it is anticipated that all
Transitional Funding Orders will be identical in all
material respects, since the issuance thereof is subject
to the discretion of the ICC, there may be variations
between Transitional Funding Orders. If the findings in
any subsequent Transitional Funding Order differ
materially from the findings in the Transitional Funding
Order disclosed in this Prospectus, all of such
differences will be disclosed in the related Prospectus
Supplement.
Intangible Transition Property.... Each Transitional Funding Order obtained by Illinois
Power from the ICC will create and establish a certain
dollar amount of Intangible Transition Property. The
Prospectus Supplement related to an issuance of Notes
will identify the Transitional Funding Order and the
total dollar amount of Intangible Transition Property
authorized thereby, which will represent the maximum
dollar amount of IFC Charges which may be imposed and
collected under such Transitional Funding Order over
time by the Servicer on behalf of the Trust without
further action by the ICC.
The right to impose, and collect payments of, the IFC
Charges from the Customers (such payments, whether
collected directly from Customers or through third-party
collection agents, including ARES, being the "IFC
Payments") gives rise to a separate property right as
set forth in the Funding Law. This property is created,
and vested in the Grantee, by a Transitional Funding
Order and, together with the related items described in
this paragraph, is referred to herein generally as the
"Intangible Transition Property." The Intangible
Transition Property includes the right, title and
interest to impose and receive IFC Charges, and all
related revenues, collections, claims, payments, money,
or proceeds thereof, including all right, title, and
interest under and pursuant to the Transitional Funding
Order which created such Intangible Transition Property.
IFC Charges....................... Under the Act, each Transitional Funding Order will
provide for the establishment, imposition and collection
of nonbypassable, usage-based, per kilowatt-hour charges
on designated consumers of electricity (the "IFC
Charges"). Specifically, each such order will provide
that IFC Charges will be imposed on each existing and
future retail customer or class of retail customers in
Illinois Power's service area (I.E., Illinois Power's
geographic service area as of January 1, 1998 and any
other locations in which it was then providing electric
utility services to Customers) in Illinois, or other
person or group of persons obligated, from time to time,
to pay to Illinois Power or any successor Applicable
Rates. In addition, each Transitional Funding Order will
specify that Illinois Power will not enter into private
contracts with any customers who, but for such
contracts, would otherwise have been obligated to pay
Applicable Rates unless the customer agrees to pay to
the Grantee or to its assigns, or to the Servicer, as
applicable, amounts equal to the IFC Charges the
customer
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would have paid had the services provided under the
private contract been subject to Applicable Rates. (The
customers described in the preceding two sentences are,
collectively, the "Customers"). However, Customers will
not include retail customers of Illinois Power not
paying Applicable Rates as a result of entering into a
contract with Illinois Power before the date the Notes
are issued, unless the customer has agreed in such
contract to pay the Grantee or its assigns, or Illinois
Power as Servicer, as applicable, an amount equal to the
amount of IFC Charges that would have been billed if the
services provided under such contract were subject to
Applicable Rates. Of amounts collected from the
Customers, only the portion of amounts collected that
comprise the IFC Charges or equivalent amounts, as
adjusted from time to time, will be available to make
payments on the Notes. IFC Charges will be deducted and
stated separately from Applicable Rates.
"Applicable Rates" means any tariffed charges owed to
Illinois Power, including, without limitation, charges
for "base rates", "delivery services" or "transition
charges" (including lump-sum payments for such charges)
as each such term is defined in the Act. Applicable
Rates do not include late charges or charges set forth
in those tariffs which are filed specifically and
primarily to collect amounts related to decommissioning
expense, taxes, municipal infrastructure maintenance
fees, franchise fees or other franchise cost additions,
costs imposed by local governmental units which are
allocated and charged to customers within the boundaries
of such governmental units' jurisdictions, renewable
energy resources and coal technology development
assistance charges, energy assistance charges for the
Supplemental Low-Income Energy Assistance Fund,
reimbursement for the costs of optional or non-standard
facilities and reimbursement for the costs of optional
or non-standard meters, or monies that will be paid to
third parties (after deduction of allowable
administrative, servicing or similar fees)
(collectively, "Excluded Amounts"). Payments owed to the
Grantee or the Trust in respect of IFC Charges do not
constitute Excluded Amounts.
To the extent any Applicable Rates reflect compensation
owed by Illinois Power for power or energy supplied to
customers by a person or entity other than Illinois
Power, the IFC Charges will be deducted and stated
separately from such Applicable Rates without giving
effect to such compensation. Administrative, servicing
and similar fees referred to in the parenthetical above
means fees which Illinois Power is expressly authorized
under its current agreements with third parties or by
statute, tariff or otherwise to deduct from monies owed
to such parties to cover its cost of processing such
third-party payments. Charges associated with Excluded
Amounts are generally the subject of separate riders to
Illinois Power's rates, such that increases in such
charges are collected through an increase in the amount
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permitted to be collected under such rider, rather than
through an increased share of the Applicable Rates. As a
result, any increase in Excluded Amounts should not
result in a material decrease in the amount of
Applicable Rates available to cover the amount of IFC
Charges.
Each Transitional Funding Order will further provide
that neither Illinois Power nor any successor Utility
may enter into any contract with any Customer obligated
(or who would, but for such contract, be obligated) to
pay IFC Charges if, as a result thereof, the Customer
would not receive services subject to Applicable Rates,
unless the contract provides that the Customer will pay
an amount each billing period to the Grantee or its
assigns, or to Illinois Power as Servicer, as
applicable, equal to the amount of IFC Charges that
would have been billed if the services provided under
such contract were subject to Applicable Rates. Each
Transitional Funding Order will further provide that any
revenues received by Illinois Power or a successor
Utility from any such contracts shall, to the extent the
IFC Charges would be imposed on the customer if the
services taken by the customer pursuant to such contract
were subject to Applicable Rates, be deemed to be
proceeds of, and included in, the Intangible Transition
Property created by the related Transitional Funding
Order. See "Description of the Intangible Transition
Property--The Transitional Funding Order Issued at the
Request of Illinois Power."
The IFC Charges will be calculated, and adjusted from
time to time, to generate projected revenues expected to
be sufficient to make the Specified Payments. In each
case, the IFC Charges will be assessed for the benefit
of the Trust as assignee of all of the Grantee's right,
title and interest in the Intangible Transition
Property. Such IFC Charges will be collected by the
Servicer, either directly from Customers or from an ARES
or other third-party collection agent that collects such
amounts from Customers, as part of its normal collection
activities and will be deposited into the Collection
Account under the terms of the Indenture and the
Servicing Agreement on each Monthly Remittance Date or
Daily Remittance Date, as the case may be.
The Funding Law provides that, notwithstanding any other
provision of law, once a Transitional Funding Order has
become final and nonappealable, none of such
Transitional Funding Order, the Intangible Transition
Property created and established thereby or the IFC
Charges authorized to be imposed and collected
thereunder shall be subject to any reduction,
postponement, impairment or termination by any
subsequent action of the ICC.
Adjustments to IFC Charges........ The Servicing Agreement and each Transitional Funding
Order will require the Servicer to calculate and
implement adjustments to the IFC Charges which are
designed to enhance the likelihood that the IFC
Collections which are remitted to the
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Collection Account will be sufficient to make the
Specified Payments.
Changes in IFC Charges, if any, resulting from an
Adjustment ("Adjustments") will take effect on the first
day of the second month following the end of each
Reconciliation Period (each such date, an "Adjustment
Date," and each such period, a "Reconciliation Period").
The IFC Charges will, subject to Adjustments as provided
herein, continue to be imposed and collected until all
interest on and principal of all Series of the Notes
have been paid in full, subject only to the limitation
of the maximum amount of Intangible Transition Property
authorized by the Commission in the Transitional Funding
Order or Orders.
All Adjustments shall be implemented pursuant to the IFC
Tariff filed by Illinois Power in connection with the
related Transitional Funding Order. As required by the
Funding Law, if, as a result of any Adjustment, the IFC
Charge as so adjusted will exceed the amount per
kilowatt-hour of the IFC Charge authorized by the ICC in
any Transitional Funding Order, then Illinois Power
shall be obligated to file amendatory tariffs or
revisions to existing tariffs (each, an "Amendatory
Tariff") adjusting the amounts otherwise billable by
Illinois Power for Applicable Rates, to offset the
amount of such excess (or, if Illinois Power shall have
previously filed any such Amendatory Tariffs, the
incremental amount of such excess). However, the failure
of such Amendatory Tariff to become effective for any
reason shall not delay or impair the effectiveness of
any such Adjustments.
See "Description of the Intangible Transition Property--
Adjustments to IFC Charges."
State Pledge...................... Pursuant to the Funding Law, the State of Illinois
pledges to and agrees with the holders of the Notes that
the State of Illinois will not in any way limit, alter
or reduce the value of the Intangible Transition
Property created by, or the IFC Charges approved by, the
Transitional Funding Order so as to impair the terms of
any contract made by Illinois Power, Grantee or Trust
with such holders or in any way impair the rights and
remedies of such holders until the Notes, together with
the interest thereon, and other fees, costs and charges
related thereto, are fully paid and discharged (the
"State Pledge"). The Funding Law authorizes issuers,
such as the Trust, to include these pledges and
agreements of the State in any contract with the holders
of the transitional funding instruments, and the pledges
and agreements shall be so included in the Indenture for
the benefit of the Noteholders. See "Security for the
Notes--State Pledge."
Payment Dates..................... The payment dates on Notes of each Series will be the
quarterly dates specified in the related Prospectus
Supplement (each, a "Payment Date"). If such specified
date is not a Business Day,
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then the Payment Date shall be the next succeeding
Business Day.
Record Dates...................... With respect to any Payment Date or date of any
redemption, the Business Day preceding such Payment Date
or other date if the Notes are Book-Entry Notes or, if
Definitive Notes are issued, the last day of the
preceding calendar month (each, a "Record Date").
Expected Final Distribution and
Final Maturity Dates............ For each Series or Class of Notes, the related
Prospectus Supplement will specify an Expected Maturity
Date and a Final Maturity Date. The Expected Maturity
Date will be the date when all principal and interest on
such Series or Class of Notes is expected to be paid in
full by the Trust, based on various assumptions
described herein. The "Final Maturity Date" corresponds
to the date on which such Series or Class of Notes may
be accelerated for failure to pay outstanding principal
thereon, which may be up to two (2) years after the
Expected Maturity Date for such Series or Class. The
Funding Law provides that the authority of the Trust to
impose and collect IFC Charges shall continue until such
time as all Notes have been paid in full.
Issuance of Additional Series..... The Trust may issue additional Series of Notes from time
to time; provided, however, the Trust may not currently
issue in excess of $864 million in aggregate principal
amount of Notes prior to August 1, 1999, and thereafter
may not issue in excess of $1.728 billion of Notes (less
the initial amount of any previously issued Notes). A
subsequent Transitional Funding Order would authorize
additional Intangible Transition Property and an
increase in the authorized amount of IFC Charges in
connection with such issuance. See "Description of the
Intangible Transition Property--The Transitional Funding
Order Issued at the Request of Illinois Power." An
additional Series may be issued only upon satisfaction
of the conditions described under "Description of the
Notes--Conditions of Issuance of Additional Series and
Acquisition of Subsequent Intangible Transition
Property." Each Series of Notes will be solely secured
by the Intangible Transition Property and the other Note
Collateral. An Event of Default with respect to one
Series of Notes (or one or more Classes thereof) may
adversely affect other outstanding Classes and Series of
Notes since such event will be considered an Event of
Default with respect to all Series of Notes and each
such Class or Series will be entitled only to its
ratable portion of the Intangible Transition Property
and the other Note Collateral as determined under the
Indenture. In addition, all Intangible Transition
Property owned by the Trust will secure all Series of
Notes and any remedial actions taken by Noteholders of
one Series will affect the other Series.
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Interest.......................... Unless otherwise specified in the related Prospectus
Supplement, interest on each Series of Notes (and, if
applicable, each Class thereof) will accrue and be
payable in arrears at the interest rate for such Series
(or Class), or calculated in the manner, specified in
the related Prospectus Supplement.
Principal......................... Principal of each Series of Notes (and, if applicable,
each Class thereof) will be paid to the Noteholders of
such Series (or Class) in the amounts and on the Payment
Dates specified in the related Prospectus Supplement,
but only to the extent that amounts in the Collection
Account are available therefor, and subject to the other
limitations described below. See "Security for the
Notes--Allocations; Payments." The related Prospectus
Supplement will set forth a schedule of the expected
amortization of principal of the related Series of Notes
and, if applicable, the Classes thereof (for any Series
or Class, the "Expected Amortization Schedule"). Unless
an Event of Default has occurred and is continuing and
the Notes have been declared due and payable, on any
Payment Date, subject to availability of funds in the
Collection Account, the Trust will make principal
payments on the Notes only until the outstanding
principal balances thereof have been reduced to the
principal balances specified in the applicable Expected
Amortization Schedule for such Payment Date (each, a
"Scheduled Payment"). However, if insufficient IFC
Collections are received with respect to any Payment
Date, and amounts in the Collection Account are not
sufficient to make up the shortfall, principal of any
Series or Class of Notes may be paid later than
reflected in the related Expected Amortization Schedule,
as described in this Prospectus and in the related
Prospectus Supplement. See "Risk Factors--Nature of the
Notes-- Uncertain Payment Amounts and Weighted Average
Life" and "Certain Payment, Weighted Average Life and
Yield Considerations."
Events of Default................. The Indenture provides that any of the following events
will constitute an "Event of Default" with respect to
any Series of Notes: (a) a default for five days in the
payment of any interest on any Note; (b) a default in
the payment of the then unpaid principal of any Note on
the Final Maturity Date for such Note; (c) a default in
the payment of the optional redemption price for any
Note on the optional redemption date therefor; (d) a
default in the observance or performance in any material
respect of any covenant or agreement of the Trust made
in the Indenture and the continuation of any such
default for a period of 30 days after notice thereof is
given to the Trust by the Indenture Trustee or to the
Trust and the Indenture Trustee by the holders of at
least 25 percent in principal amount of the Notes of
such Series then outstanding; (e) any representation or
warranty made by the Trust in the Indenture or in any
certificate delivered pursuant thereto or in connection
therewith having been incorrect in a material respect as
of the time made, and such breach not
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having been cured within 30 days after notice thereof is
given to the Trust by the Indenture Trustee or to the
Trust and the Indenture Trustee by the holders of at
least 25 percent in principal amount of the Notes of
such Series then outstanding; (f) certain events of
bankruptcy, insolvency, receivership or liquidation of
the Trust; (g) a breach by the State of Illinois or any
of its agencies (including the ICC), officers or
employees of the State Pledge; and (h) any other event
designated as such in the Trust issuance certificate or
series supplement relating to such Series.
If an Event of Default (other than as specified in
clause (g) above) has occurred and is continuing with
respect to the Notes, the Indenture Trustee may and,
upon the written direction of the holders of not less
than a majority in principal amount of the Notes then
outstanding shall, declare the unpaid principal amount
of all the Notes of all Series then outstanding to be
immediately due and payable. If an Event of Default as
specified in clause (g) above has occurred, the Servicer
shall be obligated to institute (and the Indenture
Trustee, for the benefit of the Noteholders, shall be
entitled and empowered to institute) any suits, actions
or proceedings at law, in equity or otherwise, to
enforce the State Pledge and to collect any monetary
damages as a result of a breach thereof, and each of the
Servicer and the Indenture Trustee may prosecute any
such suit, action or proceeding to final judgment or
decree.
See "Security for the Notes--Events of Default; Rights
Upon Event of Default" and "Ratings."
Optional Redemption............... Pursuant to the terms of the Indenture, any Series of
Notes may be redeemed on any Payment Date if, after
giving effect to distributions that would otherwise be
made on such date, the outstanding principal balance of
such Series of Notes has been reduced to less than five
percent (5%) of the initial principal balance thereof.
If specified in the Prospectus Supplement related to any
Series or Class of Notes, the Indenture may also permit
the redemption of any such Series or Class of Notes in
full for cash on any Payment Date on or prior to
December 31, 2004 using proceeds received from the
issuance of any additional Series or Class of Notes (the
"New Notes"). The New Notes will be payable solely out
of the Intangible Transition Property and the other Note
Collateral and will have no more than a PARI PASSU lien
thereon vis-a-vis all existing Series of Notes.
In addition, a Series of Notes shall be subject to
redemption if and to the extent provided in the related
Prospectus Supplement.
No redemption shall be permitted under the Indenture
unless each Rating Agency with respect to any Notes that
will remain outstanding after such redemption shall have
affirmed the then
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current rating of all such outstanding Notes. Upon any
redemption of any Series or Class of Notes, the Trust
will have no further obligations under the Indenture
with respect thereto.
The Notes may be so redeemed upon payment of the
outstanding principal amount of the Notes and accrued
but unpaid interest thereon as of the date of
redemption.
See "Description of the Notes--Optional Redemption."
Establishment of Collection
Accounts and Subaccounts........ Pursuant to the Indenture, a Collection Account will be
established and held by the Indenture Trustee for the
benefit of the Noteholders. The Collection Account will
consist of four subaccounts: a general subaccount (the
"General Subaccount"), a reserve subaccount (the
"Reserve Subaccount"), a subaccount for the
Overcollateralization Amount (the "Overcollateralization
Subaccount"), and a capital subaccount (the "Capital
Subaccount"). Unless the context indicates otherwise,
references herein to the Collection Account include each
of the subaccounts contained therein. Withdrawals from
and deposits to these subaccounts will be made as
described under "Security for the Notes--Allocations;
Payments."
General Subaccount................ The General Subaccount will hold all funds held in the
Collection Account that are not held in the other three
subaccounts. The Servicer will remit all IFC Collections
to the General Subaccount on each Monthly Remittance
Date or Daily Remittance Date, as required under the
Servicing Agreement. On each Payment Date, the Indenture
Trustee will draw on amounts in the General Subaccount
to pay expenses of the Trust and the Grantee and to pay
interest and make Scheduled Payments on the Notes and to
make other payments and transfers in accordance with the
terms of the Indenture.
Reserve Subaccount................ IFC Collections available with respect to any Payment
Date in excess of amounts necessary to make the
Specified Payments will be allocated to the Reserve
Subaccount. On each Payment Date, the Indenture Trustee
will draw on amounts in the Reserve Subaccount to the
extent amounts available in the General Subaccount are
insufficient to pay expenses of the Trust and the
Grantee and to pay interest and make Scheduled Payments
on the Notes and to make other payments and transfers in
accordance with the terms of the Indenture.
Overcollateralization
Subaccount...................... In order to enhance the likelihood that payments on the
Notes will be made in accordance with their Expected
Amortization Schedules, each Transitional Funding Order
will permit the Servicer to set the IFC Charges at
levels that are expected to produce IFC Collections in
amounts that exceed the amounts expected to be required
to pay interest and make Scheduled Payments on the Notes
and to pay all related fees and expenses of the Trust
and the Grantee, including the Servicing Fee and any
Administration Fee, in order to collect an additional
amount
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(for any Series, the "Overcollateralization Amount")
specified in the related Prospectus Supplement. The
Overcollateralization Amount established in connection
with each Series of Notes will not be less than 0.50
percent of the initial principal balance of such Series
of Notes, collected over the expected life of the Notes
of such Series according to a schedule set forth in the
related Prospectus Supplement. The Overcollateralization
Amount for all Series of Notes will be held in the Over-
collateralization Subaccount, as described further under
"Security for the Notes--Description of Indenture
Accounts-- Overcollateralization Subaccount." The amount
required to be on deposit in the Overcollateralization
Subaccount as of any Payment Date with respect to each
Series, as specified in the schedule set forth in the
related Prospectus Supplement, is referred to as the
"Required Overcollateralization Level." On each Payment
Date, the Indenture Trustee will draw on amounts in the
Overcollateralization Subaccount, if any, to the extent
amounts available in the General Subaccount and the
Reserve Subaccount are insufficient to pay expenses of
the Trust and the Grantee and to pay interest and make
Scheduled Payments on the Notes. If amounts on deposit
in the Overcollateralization Subaccount are used to pay
such expenses and make such payments, the
Overcollateralization Subaccount will be replenished on
subsequent Payment Dates to the extent IFC Collections
exceed amounts required to make payments or transfers
having a higher priority of payment, as more fully
described under "Security for the Notes--Allocations;
Payments."
Capital Subaccount................ Upon the issuance of each Series of Notes, the Trust
will retain proceeds equal to 0.50% of the initial
principal amount of such Series of Notes less $100,000
in the aggregate for all Series of Notes. Such amount
(with respect to each Series, the "Required Capital
Level"), will be deposited into the Capital Subaccount.
On each Payment Date, the Indenture Trustee will draw on
amounts in the Capital Subaccount, if any, to the extent
amounts available in the General Subaccount, the Reserve
Subaccount and the Overcollateralization Subaccount are
insufficient to pay expenses of the Trust and the
Grantee and to pay interest and make Scheduled Payments
on the Notes and to make other payments and transfers in
accordance with the terms of the Indenture. If amounts
on deposit in the Capital Subaccount are used to make
such payments and transfers, the Capital Subaccount will
be replenished on subsequent Payment Dates to the extent
IFC Collections exceed amounts required to pay amounts
having a higher priority of payment, as more fully
described under "Security for the Notes--Allocations;
Payments."
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Collections....................... The IFC Tariff allows the Trust to begin to impose and
collect the IFC Charges concurrently with the issuance
of the Notes of any Series (each, a "Series Issuance
Date"). The IFC Charges will be imposed and collected
based upon the entire electricity consumption of
Customers included in bills issued to Customers on and
after such Series Issuance Date, including that portion
of the applicable Billing Period during which electric
service was provided prior to such Series Issuance Date.
The Servicing Agreement provides, among other things,
that the Servicer will collect the IFC Payments on
behalf of the Trust, as assignee of the Grantee. The
Servicer will remit all IFC Payments to the Collection
Account within two Servicer Business Days of collection
unless the Monthly Remittance Conditions are met, in
which case the Servicer will remit to the Collection
Account on the tenth day of each month (or, if such day
is not a Servicer Business Day, on the next Servicer
Business Day) (each such monthly date, a "Monthly
Remittance Date"), all IFC Payments collected by the
Servicer during the immediately preceding Billing
Period. For these purposes, IFC Payments are deemed
collected when posted to a Customer's account (which
under the Servicer's current procedures occurs within
two Servicer Business Days of receipt of payment by the
Servicer). See "Servicing--Remittances to Collection
Account."
A "Billing Period" is a period created by dividing the
calendar year into twelve consecutive periods of
approximately twenty-one (21) Servicer Business Days
each, and represents the period during which the
Servicer typically renders a bill for electric service
to each of its customers. A "Servicer Business Day" is
generally any day other than a Saturday, Sunday or
holiday on which the Servicer maintains normal office
hours and conducts business.
The "Servicing Standard" will be set forth in the
Servicing Agreement and shall require the Servicer to
calculate, collect, apply, remit and reconcile proceeds
of the Intangible Transition Property, including IFC
Payments, and other Note Collateral for the benefit of
the Trust and the Noteholders (a) with the same degree
of care and diligence as the Servicer applies with
respect to payments owed to it for its own account, (b)
in accordance with procedures and requirements
established by the ICC for collection of electric
utility tariffs, and (c) in accordance with the other
terms of the Servicing Agreement.
Allocations; Payments............. On each Payment Date, amounts in the Collection Account,
including net earnings thereon, will be allocated as
shown in the following diagram, which provides a general
summary of the flow of funds from the Customers through
the Servicer to the Collection Account and the various
allocations therefrom. For a more detailed discussion,
see "Security for the Notes-- Allocation; Payments."
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Servicing......................... The Servicer is responsible for servicing, managing and
receiving IFC Payments in accordance with the Servicing
Standard. The Funding Law provides that pending deposit
into the Collection Account, all IFC Payments received
by the Servicer may be invested by the Servicer at its
own risk and for its own benefit, and need not be
segregated from other funds of the Servicer. See
"Servicing--Servicing Procedures."
It is possible that certain third-party collection
agents may collect payments (including IFC Charges) from
Customers, and that certain ARES may also bill charges
for such payments. In the latter case, the Servicer will
bill each such ARES for the full amount of IFC Charges
and other charges owed to the Servicer in its individual
capacity. In order to enhance the likelihood that the
collection of IFC Charges by the Servicer will not be
adversely affected as a result of the collection of the
IFC Charges by ARES and other third-party collection
agents, the ICC will approve certain procedures in each
Transitional Funding Order regarding the remittance
obligations of such
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third parties. See "Servicing--Alternative Retail
Electric Suppliers and Other Third-Party Collectors."
To the extent that there is a shortfall in the amounts
received by the Servicer from (a) Customers it bills
directly or (b) a third-party collection agent,
including an ARES, such shortfall will be allocated by
the Servicer to the Trust and Illinois Power PRO RATA,
based on the amount of Customers' bills constituting IFC
Charges and the amount constituting other fees and
charges owed to Illinois Power or any successor
(including charges for services other than electric
service, such as gas service, provided by Illinois
Power) or to a third party. In the event that an ARES or
another Utility provides consolidated billing to
Customers for both the services provided by such ARES or
other Utility and services provided by Illinois Power,
partial payments made to an ARES by such Customers are
required by the Act to be credited first to amounts due
to Illinois Power's tariffed services (including IFC
Charges collected on behalf of Noteholders), and the
Servicer will allocate such payments as otherwise
described above.
Servicing Compensation............ The Servicer will be entitled to receive a Servicing Fee
on each Payment Date (the "Servicing Fee"), in the
amount specified in the related Prospectus Supplement.
The Servicing Fee will be paid prior to the distribution
of any amounts in respect of interest on and principal
of the Notes. The Servicer will be entitled to retain as
additional compensation net investment income on IFC
Payments received by the Servicer prior to remittance
thereof to the Collection Account and the portion of
late fees, if any, paid by Customers relating to the IFC
Payments. See "Servicing--Servicing Compensation."
No Servicer Advances.............. The Servicer will not make any advances of interest or
principal on the Notes.
Denominations..................... Each Series of Notes (and, if applicable, each Class
thereof) will be issued in the minimum initial
denominations set forth in the related Prospectus
Supplement and in integral multiples thereof.
Book-Entry Notes.................. Each Series of Notes (and, if applicable, each Class
thereof) may be issued in definitive form or initially
may be represented by one or more notes registered in
the name of Cede (each, a "Book Entry Note" and
collectively, the "Book-Entry Notes"), the nominee of
DTC, and available only in the form of book-entries on
the records of DTC, participating members thereof
("Participants") and other entities, such as banks,
brokers, dealers and trust companies, that clear through
or maintain a custodial relationship with a Participant,
either directly or indirectly ("Indirect Participants").
If so indicated in the applicable Prospectus Supplement,
Noteholders may also hold Book-Entry Notes of a Series
through CEDEL or Euroclear (in Europe), if they are
participants in such systems or indirectly through
organizations that are participants in such systems.
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Notes representing Book-Entry Notes will be issued in
definitive form only under the limited circumstances
described herein and in the related Prospectus
Supplement. With respect to the Book-Entry Notes, all
references herein to "holders" reflect the rights of
owners of the Book-Entry Notes as they may indirectly
exercise such rights through DTC and Participants,
except as otherwise specified herein. See "Risk Factors"
and "Description of the Notes--Book-Entry Registration."
Ratings........................... It is a condition of issuance of each Series of Notes
(and, if applicable, each Class thereof) that at the
time of issuance such Series (or Class) receive the
rating indicated in the related Prospectus Supplement,
which will be in one of the four highest categories,
from one or more of the Rating Agencies specified
therein. See "Ratings" in the related Prospectus
Supplement.
A security rating is not a recommendation to buy, sell
or hold securities and may be subject to revision or
withdrawal at any time. No person is obligated to
maintain any rating on any Note and, accordingly, there
can be no assurance that the ratings assigned to any
Series (or Class) of Notes upon initial issuance thereof
will not be revised or withdrawn by a Rating Agency at
any time thereafter. If a rating of any Series (or
Class) of Notes is revised or withdrawn, the liquidity
of such Series (or Class) of Notes may be adversely
affected. In general, the ratings address credit risk
and do not represent any assessment of the rate of
principal payments on the Notes. See "Risk
Factors--Nature of the Notes--Uncertain Payment Amounts
and Weighted Average Life," "Certain Payment, Weighted
Average Life and Yield Considerations" and "Ratings."
Taxation of the Notes............. In the opinion of Mayer, Brown & Platt, interest paid on
the Notes generally will be taxable to a United States
Noteholder (as hereinafter defined) as ordinary interest
income at the time it accrues or is received in
accordance with such United States Noteholder's method
of accounting for United States federal income tax
purposes. Such opinion assumes that, based on a ruling
or tax opinion described under "Material United States
Federal Tax Consequences," the Notes will constitute
indebtedness of Illinois Power for federal income tax
purposes.
See "Material United States Federal Tax Consequences"
herein and in the related Prospectus Supplement.
ERISA Considerations.............. The Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code"), impose
various requirements on employee benefit plans and
certain other plans and arrangements subject to ERISA,
and on persons who are fiduciaries with respect to such
plans and arrangements, in connection with the
investment of assets which are deemed to be "plan
assets" for purposes of ERISA or Section 4975 of the
Code, unless a statutory or administrative exemption is
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available. A fiduciary of any employee benefit plan or
other plan or arrangement that is subject to ERISA or
Section 4975 of the Code, before purchasing the Notes,
should therefore determine that an investment in the
Notes is consistent with the fiduciary duties of ERISA
and does not violate the prohibited transaction
provisions of ERISA or the Code. See "ERISA
Considerations" herein and in the related Prospectus
Supplement.
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RISK FACTORS
The risk factor disclosure in this Prospectus and in any Prospectus
Supplement, to the extent disclosure is included therein, summarizes all
material risk factors. Investors should consider, among other things disclosed
in this Prospectus, the following factors in connection with the purchase of the
Notes.
UNCERTAINTIES ASSOCIATED WITH UNUSUAL ASSET TYPE
There is no historical performance data for an asset type such as the
Intangible Transition Property in the State of Illinois and the Servicer does
not have any historical experience administering this specific type of asset.
Although energy usage records are available, such records have limited
predictive value with respect to the cash flows expected to be available for
payment of the Notes because of the significant changes to electricity markets
in Illinois that are likely to result from the Amendatory Act. In addition,
although the Funding Law provides that the Noteholders or the Indenture Trustee
may foreclose or otherwise enforce the lien on the Intangible Transition
Property securing the Notes, in the event of a foreclosure, there is likely to
be a limited market, if any, for Intangible Transition Property and, therefore,
foreclosure upon the Intangible Transition Property may not be a realistic or
practical remedy for the Noteholders.
LEGAL CHALLENGES WHICH COULD ADVERSELY AFFECT NOTEHOLDERS
The existence and grant of Intangible Transition Property, the status of
such Intangible Transition Property as a separate property right and the
regulatory authorization for Illinois Power's entering into the transactions
under the Basic Documents are generally dependent on relevant provisions of the
Funding Law and the related Transitional Funding Order. The Amendatory Act (of
which the Funding Law is a part) provides that if any of its provisions are held
invalid, all of its provisions shall be deemed invalid. Thus, a judicial
determination that any provision of the Amendatory Act is invalid would, absent
legislative intervention at that time, result in the entirety of the Amendatory
Act (including the Funding Law) being deemed invalid. It is therefore possible
that, although a Transitional Funding Order has become final and no longer
subject to appeal, a legal challenge to the Amendatory Act could result in
payment delays or losses to the Noteholders. However, the Amendatory Act also
provides that no presumption as to the validity or invalidity of any contracts,
transactions, order, billings or payments pursuant to the Funding Law (such as
the contracts, transactions, orders, billings or payments related to the
Transitional Funding Orders) shall result from a determination of the invalidity
of the Amendatory Act.
Illinois Power will represent and warrant in each Grant Agreement that the
related Transitional Funding Order is valid, binding and irrevocable. There can
be no assurances, however, that a claim by a person that a provision of the
Amendatory Act is invalid would not result in the invalidation of the entire
Amendatory Act (including the Funding Law). If the Amendatory Act were
invalidated, a person could attempt to challenge such Transitional Funding Order
by arguing that such invalidation should be applied retroactively with the
result that there is no regulatory authorization for the associated
transactions. If such an argument were successful, such Transitional Funding
Order, the Intangible Transition Property created thereby and the transactions
entered into pursuant to its authorization, could all be deemed invalid for lack
of authorization, and Noteholders could suffer a loss of their investment in the
Notes.
The issuance of Notes is conditioned upon the rendering of an opinion by
Schiff Hardin & Waite, counsel to Illinois Power, to the effect that such
Transitional Funding Order would remain in effect and the rights thereunder,
including the rights of the Trust to impose and collect the portion of
Customers' bills represented by the IFC Charges, would remain enforceable
against Illinois Power and its assigns (including a trustee in bankruptcy) in
the event of a judicial invalidation of the Amendatory Act unless a specific
order or ruling were obtained from a court or the ICC invalidating, amending or
otherwise modifying such Transitional Funding Order.
The issuance of Notes is further conditioned upon the rendering of an
opinion by Schiff Hardin & Waite to the effect that a judicial determination
that one or more provisions of the Amendatory Act is
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invalid should not be applied so as to result in the Noteholders losing their
rights created pursuant to such Transitional Funding Order. Such opinion will be
based on a reasoned application of judicial decisions involving similar or
analogous circumstances (inasmuch as there are no reported controlling
precedents) which have recognized that judicial decisions should not be applied
retroactively where to do so would produce inequitable results, re-open final
judgments or impair vested rights, such as the rights created pursuant to such
Transitional Funding Order. Any judicial determination would also involve the
application of equitable principles. Although Illinois Power has agreed in the
Grant Agreement that any impairment of Noteholders' rights to payments on the
Notes arising from a judicial invalidation of the Amendatory Act is inequitable,
such statement is not binding on any court and any application of equitable
principles would be subject to the discretion of the court which is asked to
apply them and the court's evaluation of the facts and equities before it. In
that connection, a declaration of invalidity of the Funding Law itself, as
opposed to an invalidation solely as the result of an invalidation of another
provision of the Amendatory Act, would be a factor tending to reduce the
strength of the equitable principles and related considerations that otherwise
would support the continuing validity of the rights of the Noteholders.
Accordingly, the issuance of the Notes is further conditioned on the inclusion
of a statement in the opinion to be delivered by Schiff Hardin & Waite that
nothing in their research in connection with such opinion revealed any judicial
decisions which such firm believes would provide a basis on which a court would
declare the Funding Law to be invalid.
In light of the foregoing discussion, there can be no assurance that a
judicial invalidation of one or more provisions of the Amendatory Act will not
also result in the invalidation of a Transitional Funding Order or Noteholders'
rights with respect thereto. In this regard, investors should be aware that a
successful challenge under federal law of another state's utility deregulation
statute that is similar to the Amendatory Act could be invoked as legal
precedent for invalidating the Amendatory Act.
POSSIBLE PAYMENT DELAYS OR LOSSES AS A RESULT OF AMENDMENT OR REPEAL OF
AMENDATORY ACT OR BREACH OF STATE PLEDGE
The Illinois Legislature could amend or repeal the Funding Law or other
provisions of the Amendatory Act or take actions in contravention of the State
Pledge which could impair the rights of the Noteholders and affect the
collection of IFC Charges and payments on the Notes. Such actions would be
subject to challenge under the United States and Illinois Constitutions, and as
a condition to the issuance of the Notes, Schiff Hardin & Waite will render an
opinion to the effect that, absent a demonstration by the State of Illinois that
an impairment is necessary to further a significant and legitimate public
purpose, the Noteholders could challenge successfully under the Contract Clauses
of such Constitutions the constitutionality of any law subsequently enacted by
the Illinois Legislature that purports to limit, alter, impair or reduce the
value of the rights of the Noteholders or the IFC Charges so as to impair
substantially the Indenture or the Notes or the rights and remedies of the
Noteholders until such time as the Notes are fully paid and discharged. In
addition, Illinois Power will represent and warrant in the Grant Agreement that
the State of Illinois may not limit, alter, impair or reduce the value of the
Intangible Transition Property in a manner substantially impairing the Indenture
or the rights and remedies of the Noteholders (and, consequently, may not
revoke, reduce, postpone or terminate the related Transitional Funding Order or
the rights of the Noteholders to receive IFC Payments and all other proceeds of
the Intangible Transition Property), until the Notes, together with interest
thereon, are fully paid and discharged (except to the extent of a temporary
impairment that the State of Illinois were to demonstrate is necessary to
advance a significant and legitimate public purpose).
Illinois law does not permit citizens to initiate substantive legislation
through referendums. The Illinois Constitution does permit citizen-initiative
amendments; however, those amendments are constitutionally limited to addressing
"structural and procedural subjects" governing the structure, composition and
operation of the Illinois Legislature. The Illinois Supreme Court has held
attempts to use those provisions to enact substantive legislation to be outside
the scope of the provisions. As a condition to the issuance of the Notes, Schiff
Hardin & Waite will render an opinion to the effect that, based on such court
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decisions, an attempt by citizens of Illinois to use the initiative power to
enact legislation causing an impairment of the rights of Noteholders would be
held invalid.
Because the IFC Charges are to be deducted from Applicable Rates and the
right of Illinois Power to collect Applicable Rates is not solely dependent on
the provisions of the Amendatory Act, an amendment or repeal of the Amendatory
Act would not eliminate (although it could reduce) the sources of cash flow from
which the Notes are to be repaid. Illinois Power will covenant in the Servicing
Agreement that it will continue to impose and collect all IFC Charges (as
adjusted from time to time) or equivalent amounts, deduct IFC changes or
equivalent amounts from Applicable Rates and remit such amounts to the Trust (in
each such case unless otherwise prohibited by applicable law or judicial or
regulatory order in effect at such time) notwithstanding any such repeal or any
amendment of the Amendatory Act. Under current law, no assurance can be given
that the Servicer is authorized to act in accordance with such covenant if the
applicable Transitional Funding Order is no longer in effect. Therefore, no
assurance can be given that a repeal or amendment of provisions of the
Amendatory Act might not impair the rights of the Noteholders. However, Illinois
Power has agreed to indemnify the Noteholders for certain losses which may
result if Illinois Power is unable to continue to impose or collect IFC Charges
or equivalent amounts. See "Description of the Intangible Transition
Property--Grant Agreement--Indemnification Obligations of Illinois Power." If
the Illinois Legislature were to repeal or amend the Funding Law in a manner
adverse to Noteholders in violation of the State Pledge, the Servicer would be
obligated to institute (and the Indenture Trustee, for the benefit of the
Noteholders, shall be entitled and empowered to institute) any necessary
proceedings to seek to overturn such change in law, to enforce the State Pledge
and to collect any monetary damages which may result therefrom; and each of the
Servicer and the Indenture Trustee may prosecute such proceedings to final
judgment or decree. The Servicer would be required to advance its own funds to
cover the costs of prosecuting any such proceedings, but would be entitled to
reimbursement for such costs as an Operating Expense under the Indenture. Any
such proceedings might adversely affect the price and liquidity of the Notes and
the rate of repayment thereof, and, accordingly, the weighted average lives
thereof. Moreover, given the lack of judicial precedent directly on point, and
the novelty of the security for the Notes, the outcome of any such proceedings
cannot be predicted with certainty; and, accordingly, Noteholders may suffer a
loss of their investment in the Notes.
LIMIT ON AMOUNT OF INTANGIBLE TRANSITION PROPERTY AVAILABLE TO PAY NOTES
The Funding Law requires that each Transitional Funding Order authorize a
specific dollar amount of Intangible Transition Property, which represents the
maximum dollar amount of IFC Charges which may be imposed and collected over
time without further action by the ICC. If for any reason (E.G., because of
increased servicing costs, operating expenses, changes in technology, defaults
by third-party collectors or any other factors) the amount of IFC Charges
necessary to amortize the Notes in full were to exceed the maximum authorized
dollar amount of IFC Charges which may be imposed by more than the amount in the
Capital Subaccount, then Illinois Power, as Servicer, would be obligated, in
good faith, to require the ICC to increase the previously authorized dollar
amount of Intangible Transition Property. The ICC is not required under the
Funding Law to approve any such increases, however, except in connection with an
issuance of additional Notes, and the Noteholders could, accordingly, suffer a
loss in such event. The Prospectus Supplement related to each Series of Notes
will set forth the maximum aggregate dollar amount of IFC Charges which may be
imposed. In its application for the Initial TFO, Illinois Power estimated the
amount of IFC Charges which would be necessary to be billed through the Expected
Maturity Date of all Classes of Notes described in the related Prospectus
Supplement in order to pay interest and principal on the Notes.
POTENTIAL SERVICING ISSUES
RELIANCE ON ILLINOIS POWER AS SERVICER. The Trust will rely on the Servicer
for the determination of any Adjustments to the IFC Charges and for the Customer
billing and collection services that are necessary to recover the IFC Payments
and, ultimately, to make payments on the Notes. If, as a result of its
insolvency or liquidation or otherwise, Illinois Power were to cease performing
its functions as Servicer, it may be
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difficult to find a substitute servicer, and there can be no assurance that a
substitute servicer will be engaged. In such an event, the timing of recovery of
IFC Payments could be delayed. Any Successor Servicer may have less experience
than Illinois Power and less capable systems than those employed by Illinois
Power, and, given the complexity of the tasks to be performed by the Servicer
and the expertise required, a Successor Servicer may experience difficulties in
collecting IFC Payments and determining appropriate adjustments to IFC Charges.
Further, any Successor Servicer who is not a provider of electric service may
not be able to invoke a remedy of shutting off service to a Customer for
nonpayment of the IFC Charge. In addition, the Servicing Agreement and, unless
otherwise provided in the related Prospectus Supplement, each Transitional
Funding Order, permit a higher Servicing Fee to be paid to the Servicer if IFC
Charges are not imposed and collected by the Servicer in conjunction with
billing to, and collecting charges from, the Customers for electric service. See
"Servicing."
POSSIBLE PAYMENT DELAYS CAUSED BY INACCURATE USAGE AND CREDIT
PROJECTIONS. If the Servicer is unable to forecast accurately the electricity
usage of Customers, the related revenues from Applicable Rates, and the
delinquency and write-off experience relating to IFC Payments, the timing and
amount of IFC Collections may be significantly affected and therefore
Noteholders may fail to receive timely payments of interest on the Notes or
payments of principal in accordance with the Expected Amortization Schedules or
in full by the Expected or Final Maturity Dates. Actual energy usage may differ
from projections as a result of weather during the relevant period that is
warmer or cooler than expected. In addition, actual energy usage, delinquencies
and write-offs may differ from projections as a result of general economic
conditions, trends in demographics that are not precisely as predicted, changes
in technology that result in decreased purchases of electricity, unexpected
catastrophes, and other causes. Past accuracy of the Servicer's historical
forecasts is not necessarily indicative of the accuracy of the Servicer's future
forecasts and there can be no assurances that actual usage, delinquencies and
write-offs will not be significantly different from future forecasts thereof.
See "The Servicer--Forecast Variances."
POSSIBLE PAYMENT DELAYS CAUSED BY CHANGES IN PAYMENT TERMS OF
CUSTOMERS. Because the Servicer is permitted (in accordance with the Servicing
Standard) to alter the terms of billing and collection arrangements and modify
amounts due from Customers, such alterations and modifications could delay
collections from Customers or result in lower collections, and accordingly could
adversely affect the timely payment of interest on the Notes or the payment of
the principal of the Notes pursuant to the Expected Amortization Schedule
therefor or in full by the applicable Expected or Final Maturity Dates.
Although the Servicer does not have the right to change the amount of an
individual Customer's IFC Charge (unless the Customer's IFC Charge exceeds the
amount of Applicable Rates to be billed to the Customer, in which case the
Customer's IFC Charge will be limited to the amount of Applicable Rates), the
Servicer does have the right to take actions that in its judgment will maximize
actual collections from Customers with respect to any utility bill. In addition,
the Servicer has the right to write off outstanding bills that it deems
uncollectible in accordance with its customary practices. Such actions might
include, for example, agreeing to an extended payment schedule or agreeing to
write off a portion of an outstanding bill in order to recover a portion
thereof. In certain circumstances, Illinois Power is required by provisions of
the Public Utilities Act or regulations of the ICC to take such actions, or to
refrain from normal collection actions. While Illinois Power has no current
intention of taking actions that would change the billing and collection
arrangements in a manner which would affect adversely the collection of IFC
Payments, there can be no assurance that changes in Illinois Power's customary
and usual practices for comparable assets it services for itself might not
result in a determination to do so or that a Successor Servicer may not make
such a determination. Illinois Power could also be required to modify its
billing and collection arrangements due to changes in the Public Utilities Act
or ICC regulations governing such arrangements. See "The Servicer--Credit
Policy; Billing; Collections; Restoration of Service."
LIMITED INFORMATION REGARDING CUSTOMERS. The ability of the Servicer to
collect amounts billed to Customers, including the IFC Charges, will depend in
part on the creditworthiness of the Customers. If Illinois Power evaluates the
creditworthiness of a significant number of its Customers incorrectly, resulting
in significant increases in delinquencies and write-offs, delays in
distributions to Noteholders may occur.
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As a general matter, Illinois Power is obligated to provide service to new
Customers under Illinois law and performs no outside credit investigations on
new Customers. Illinois Power's information regarding the credit status of new
Customers is limited to information regarding prior service, if any, by Illinois
Power to such Customers.
An important element of Illinois Power's policies and procedures relating to
credit and collections is its right to disconnect service on account of
nonpayment. Each Transitional Funding Order will expressly provide that Illinois
Power may disconnect service for nonpayment of IFC Charges to the same extent as
Illinois Power would be entitled to take such action because of nonpayment of
any other charge for tariffed services. Nonetheless, Illinois Power's rights to
disconnect service are subject to and, to a material extent, controlled by
Illinois statutory requirements and the rules and regulations of the ICC which
may change from time to time. See "The Servicer--Credit Policy; Billing;
Collections; Restoration of Service."
POSSIBLE PAYMENT DELAYS CAUSED BY RELIANCE ON ALTERNATIVE RETAIL ELECTRIC
SUPPLIERS AND OTHER THIRD-PARTY COLLECTORS. As part of the restructuring of the
Illinois electric industry, certain Customers will be allowed, beginning October
1, 1999, and all Customers will be allowed as of May 1, 2002, to purchase
electricity and related services from ARES and from other Utilities rather than
from Illinois Power. See "Electric Industry Restructuring in
Illinois--Alternative Retail Electric Suppliers." The Amendatory Act requires
Illinois Power to allow such ARES and other Utilities, pursuant to a tariff
filed by Illinois Power with and approved by the ICC, to issue a single bill
(which would include the applicable IFC Charges) to any retail customer
purchasing electricity or related services from the ARES or other Utility and
delivery services from Illinois Power for both the services provided by the ARES
or other Utility and the delivery services provided by Illinois Power. The
applicable IFC Charges included in a single bill to a Customer are required to
be remitted to the Servicer by such ARES. If a substantial number of Customers
elect to purchase their electricity from ARES that elect to provide a single
bill, the Servicer may be relying on a small number of ARES, each of whom is
responsible for a substantial portion of the Servicer's total billings, to
collect IFC Charges, rather than the Servicer collecting IFC Charges directly
from all Customers. In this circumstance, a default in the collection and
remittance of IFC Charges to the Servicer by a single ARES that provides
electricity to a large number of Customers may adversely affect the Servicer's
ability to make timely remittance of IFC Charges to the Collection Account,
resulting in shortfalls thereof. Such IFC Collection shortfalls could adversely
affect the timely payment of interest on the Notes or the payment of principal
of the Notes in accordance with the Expected Amortization Schedules therefor or
in full by the applicable Expected or Final Maturity Dates.
In addition, there can be no assurance that any ARES will use the same
customer credit standards as the Servicer or that the Servicer will be able to
mitigate credit risks relating to ARES in the same manner in, or to the same
extent to, which it mitigates such risks relating to its Customers, both of
which may have the effect of causing shortfalls in IFC Collections. Changes in
Customer billing and payment practices caused by ARES billing may result in
misdirected or delayed payments due to customer confusion, which could also have
the effect of causing shortfalls in IFC Collections. Furthermore, the Servicer
will have no meaningful ability to control the collection procedures of ARES or
other third parties who simply forward payments on behalf of Customers and not
pursuant to contractual arrangements with Illinois Power or pursuant to
consolidated billing procedures. Finally, any problems arising from new and
untested systems or any lack of experience on the part of any ARES or other
third parties with Customer billings and collections could cause delays in
billing and collecting the IFC Charges resulting in shortfalls in IFC
Collections. Such IFC Collection shortfalls could adversely affect the timely
payment of interest on the Notes or the payment of principal of the Notes in
accordance with the Expected Amortization Schedule therefor or in full by the
applicable Expected or Final Maturity Dates.
POSSIBLE PAYMENT DELAYS CAUSED BY COMMINGLING OF IFC PAYMENTS WITH
SERVICER'S OTHER FUNDS. If the Monthly Remittance Conditions are met, on each
Monthly Remittance Date the Servicer will remit to the Collection Account IFC
Payments collected during the preceding Billing Period; otherwise, on each Daily
Remittance Date, the Servicer will remit all IFC Payments to the Collection
Account within two Servicer Business Days of collection by the Servicer. For
these purposes, IFC Payments are deemed
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collected when posted to a Customer's account (which under the Servicer's
current procedures occurs within two Servicer Business Days of receipt of
payment by the Servicer). Accordingly, IFC Payments received by the Servicer
would not be segregated from the Servicer's general funds until they are
remitted to the Collection Account. A failure or inability of the Servicer to
remit the full amount of the IFC Payments on any Monthly Remittance Date or
Daily Remittance Date, whether voluntary or involuntary, might result in delays
in payments to Noteholders. Such retention of funds could also have adverse
consequences to Noteholders in the event of a bankruptcy of the Servicer. See
"--Bankruptcy and Creditors' Rights Issues--Possible Adverse Effect on
Noteholders as a Result of the Bankruptcy of the Servicer."
POSSIBLE PAYMENT DELAYS AS A RESULT OF YEAR 2000 ISSUES--YEAR 2000 READINESS
DISCLOSURE. Illinois Power uses various software applications and embedded
systems throughout its businesses that will be affected by so-called "Year 2000
issues." These issues may prevent an application or system from correctly
processing dates up to the year 2000 and beyond. Based on Illinois Power's
current schedule for completion of Year 2000 tasks, Illinois Power believes that
its planning is adequate to secure Year 2000 readiness of its critical systems.
Nevertheless, achieving Year 2000 readiness is subject to various risks and
uncertainties, and Illinois Power is not able to predict all the factors that
could cause actual results to differ materially from its current expectations as
to its Year 2000 readiness.
A failure to correct any critical Year 2000 processing problems prior to
January 1, 2000 could have material adverse operational and financial
consequences if the affected systems either cease to function or produce
erroneous data. For example, the Year 2000 issues could affect, among other
things, the ability of Illinois Power, as Servicer, and any ARES, to bill and
collect the IFC Charges, both because of problems with their own systems and
problems that Customers may have in processing bills, and the ability of the
Servicer and ARES to meter usage. This could result in significant delays in IFC
Collections and, therefore, in payments to Noteholders. The Year 2000 issues
could affect usage by Customers if there are problems in the generation or
distribution of electricity which could cause the amount of Applicable Rates
from which IFC Charges will be deducted to be materially decreased or delayed.
See "--Reduction in Amount of Revenue From Applicable Rates." For a more
thorough discussion of the Year 2000 issues, see "The Servicer--Year 2000
Readiness Disclosure."
UNCERTAINTIES RELATED TO THE ELECTRIC INDUSTRY GENERALLY
UNTRIED NEW ILLINOIS MARKET STRUCTURE. The Illinois electric industry is
expected to change dramatically in the near future, as a result of enactment of
the Amendatory Act. See "Electric Industry Restructuring in Illinois." If
difficulties are experienced in implementing the various aspects of the new
market structure in Illinois, electricity generation, transmission and
distribution may be adversely affected, IFC Payments may not be made as
expected, Illinois Power's business may be adversely affected, and Noteholders
may fail to receive payments of principal and interest.
Beginning October 1, 1999, under the new market structure, certain retail
customers will be eligible to purchase electricity from suppliers other than the
certificated local Utility, and by May, 2002, all retail customers of
investor-owned Utilities in Illinois will be entitled to purchase electricity
from other suppliers. Each local electric Utility, such as Illinois Power, will
be required to deliver the electricity sold by other suppliers to retail
customers in the Utility's service area. In addition, as a result of both the
Amendatory Act and federal initiatives, Utilities may be required to turn over
control and/or operation of their transmission systems to an independent
operating entity. Further, under the Amendatory Act, Utilities, such as Illinois
Power, will be entitled to enter into contracts for service with customers which
will not be subject to regulation by the ICC as to prices, terms and conditions.
The new electric market structure has neither been tested or implemented on a
scale represented by the State of Illinois. Attempts to initiate operations
under a similar market structure in California, as mandated by statute, resulted
in a series of delays in implementation due to difficulties in bringing the
necessary new systems and procedures to an acceptable state of readiness and
reliability. In addition, the impacts of the implementation of the new
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market structure on the pricing of electricity services, Customer usage of
electricity, and the tariffed and other revenues received by Illinois Power,
cannot be predicted with certainty.
Illinois Power is in the process of examining its existing investments and
operations in relation to the changing regulatory environment with a view to
rationalizing Illinois Power's investment in, and operating costs of, particular
assets against their ability to contribute to Illinois Power's profits and
revenues. One option under review is the sale or other disposition of some or
all of Illinois Power's generating assets (including the sale or shut-down of
its Clinton Power Station). A number of vertically integrated utilities in
various states have divested, or are in the process of divesting, generating
assets in connection with the implementation of electric industry restructuring
and deregulation in those states. Such sales or dispositions, if implemented by
Illinois Power, could have the effect of separating the generation component of
Illinois Power's business from the transmission and distribution component with
the result, for example, that Illinois Power would substitute wholesale
purchases of electricity for lost generation capacity and resell the electricity
so purchased to its retail customers under tariffs or contracts for
fully-bundled services. Illinois Power does not believe that such transactions
will have a material adverse effect on the revenues it receives from Customers
and therefore will not materially adversely affect the timing or amounts of IFC
Collections. Nonetheless, there can be no assurance that such transactions will
not reduce the amount of Applicable Rates available to Illinois Power from which
the IFC Charges must be deducted. See "--Uncertainties Related to the Electric
Industry Generally--Reduction in Amount of Revenue from Applicable Rates".
SHRINKING CUSTOMER BASE AS A RESULT OF TECHNOLOGICAL CHANGE. The continuous
processes of technological development may result in introduction of
economically-attractive alternatives to the purchase of electricity from
Utilities, such as Illinois Power, for increasing numbers of Customers. Since
the IFC Charges are based on electricity usage by the Customers of Illinois
Power, reductions in the amount of electricity sold or delivered by Illinois
Power to its Customers will result in higher IFC Charges than would otherwise
exist and could negatively impact the timing of IFC Payments and may result in
delays in payments on the Notes. For example, a Customer which obtains its
electricity from its own cogeneration or self-generation facilities and does not
purchase any electricity or take delivery services or any other tariffed
services from Illinois Power will not pay transition charges or other tariffed
charges on the electricity it obtains from such facilities and thus will not be
obligated to pay IFC Charges with respect to that electricity. Even if such a
Customer were to continue purchasing some but not all of its electricity from
Illinois Power, the amount of electricity which the Customer purchases from
Illinois Power, and therefore the amount of IFC Charges the Customer is
obligated to pay, would be less than if the Customer were purchasing all of its
electricity from Illinois Power.
Previously, only the largest industrial and institutional users with large
process steam requirements in Illinois Power's service area were considered
candidates for cost-effective cogeneration or self-generation installations.
However, manufacturers of self-generation facilities continue to develop
smaller-scale, more fuel-efficient generating units which can be cost-effective
options for customers with smaller electric energy requirements. For example,
Unicom Energy Services, Inc., an affiliate of Commonwealth Edison, the largest
Utility in Illinois, is engaged in a joint venture with a major electrical
equipment manufacturer to market smaller electric generating units that may be
suitable and cost-effective for installation in smaller commercial
establishments. Other Illinois public utilities or their affiliates have formed
similar business alliances with manufacturers of such equipment. Eventually,
such units may be produced in sizes, costs, and with operating efficiencies that
make them cost-effective for installation in residences. Other types of
distributed generation which could be purchased by customers in order to bypass
the local Utility include fuel cells. In addition, continuing advances in the
operating efficiencies of electricity-consuming devices are a factor reducing
the amount of electricity purchased by consumers from Utilities.
Within the time period between issuance and maturity of the Notes, there can
be no assurances that the technological developments described herein, and
others, will not result in material reductions in the amount of electricity sold
or delivered by Illinois Power to its Customers.
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SHRINKING CUSTOMER BASE AS A RESULT OF MUNICIPALIZATION. The Amendatory Act
expressly preserves the right of a municipality under certain circumstances to
form a municipal utility which can purchase electric power and energy on a
wholesale basis for resale to Customers within the geographic areas it is
lawfully entitled to serve and also allows municipalities, subject to certain
conditions, to become ARES. In either the event of municipalization or upon a
municipality becoming an ARES, the number of Illinois Power's Customers
receiving power and energy from Illinois Power would decline, resulting in the
reduction in the amount of electricity sold or delivered by Illinois Power to
its Customers. Since the IFC Charges are based on electricity usage by Customers
of Illinois Power, such reductions will result in higher IFC Charges than would
otherwise exist and could negatively impact the timing of IFC Payments.
A municipality within Illinois Power's service area which wanted to operate
a municipal utility would have to form its own distribution system, either by
building one or acquiring (through negotiated purchase or appropriate
condemnation proceedings) the portion of Illinois Power's distribution system
related to such municipality's service area. Under Order 888 of the Federal
Energy Regulatory Commission ("FERC"), Illinois Power would have the right to
seek recovery of its legitimate, prudent and verifiable stranded costs resulting
from a municipalization, with the amount of such recovery to be determined
through appropriate proceedings before FERC. If a municipalization were to
occur, a portion of any such condemnation award or other recoveries that was
made in respect of lost tariffed revenues would be allocable, in accordance with
the Servicing Agreement, to the IFC Charges and Illinois Power would be required
to pay such portion to the Trust as proceeds of the Intangible Transition
Property. Nonetheless, in the event of a municipalization, the Customers within
such municipal utility's service area would thereafter cease to be Customers of
Illinois Power obligated to pay IFC Charges and the loss of such Customers could
result in a material reduction in the amount of electricity sold or delivered by
Illinois Power. Moreover, unless the municipality, in its capacity as a retail
customer, elected to take tariffed or contract services from Illinois Power, the
municipality itself would not be a Customer and would also not be obligated to
pay IFC Charges. Reductions in the amount of electricity sold or delivered by
Illinois Power will result in increased IFC Charges and could negatively impact
the timing of the IFC Payments.
As of September 1, 1998, there were only twelve municipal utilities
operating within Illinois Power's service area, the last of which was created
several decades ago. Although there can be no assurance that other
municipalities in Illinois Power's service area might not seek, prior to the
time the Notes are paid in full, to form a municipal utility, Illinois Power
does not believe there is any material risk of future municipalizations having
an adverse impact on the Noteholders.
In the event that a municipality becomes an ARES, the Customers receiving
power and energy from such municipality (or the municipality on their behalf)
would remain obligated to pay IFC Charges in connection with Illinois Power's
provisions of delivery services to such Customers and in connection with any
payments of transition charges owed by such Customers. The loss of such
Customers could nonetheless result in a material reduction in the amount of
electricity generated by Illinois Power and, therefore, in the amount of
revenues supporting payment of the IFC Charges.
POSSIBLE PAYMENT DELAYS CAUSED BY CHANGES IN GENERAL ECONOMIC CONDITIONS AND
ELECTRICITY USAGE. General economic conditions and technological changes that
would significantly alter power consumption or reduce the Customer base in
Illinois Power's service area may affect payments on the Notes. Changes in
business cycles, departures of Customers from Illinois Power's service area,
other demographic changes, weather, occurrence of natural disasters such as ice
storms, tornados, windstorms, earthquakes and floods, implementation of energy
conservation efforts and increased efficiency of equipment all affect energy
usage. If a sufficient number of Customers reduce significantly their
electricity consumption or cease consuming electricity altogether, revenues
supporting payment of the IFC Changes could decrease, and such decreases could
negatively impact the timing of the IFC Payments.
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UNCERTAINTIES CAUSED BY CHANGING REGULATORY AND LEGISLATIVE ENVIRONMENT
Although the Amendatory Act provides for comprehensive changes in the legal
and regulatory framework governing electric utilities, such as Illinois Power,
in Illinois, there can be no assurances that, during the term to maturity of the
Notes, the Illinois Legislature will not pass additional laws materially
changing the legal and regulatory framework to which Illinois Power is subject.
Any changes in the existing legal structure regulating the electric industry
might have an impact on the manner in which electricity is distributed and
payments therefor are collected, or on Illinois Power and its business, and thus
the likelihood that Noteholders will receive payments in the amounts and at the
times scheduled.
In addition to actions taken by the Illinois Legislature and regulation by
the ICC, the electric industry is also subject to federal law and to regulation
by the FERC. The National Energy Policy Act of 1992 was designed to increase
competition in the wholesale electric generation market by easing regulatory
restrictions on producers of wholesale power and by authorizing the FERC to
mandate access to electric transmission systems by wholesale power generators.
In addition, at least 14 bills (none of which passed in committee) were
introduced in the 105th Congress, affecting the deregulation of the electric
utility industry on the state level. Many, but not all, of the bills contained
provisions recognizing the validity of prior state actions relating to
deregulation. At least two of the bills, H.R. 1230 and H.R. 4798, however, would
have prohibited the recovery of stranded costs through charges such as the
transition charges provided for in the Amendatory Act. Although the IFC Charges
do not constitute recoveries for stranded costs, any prohibition on the
imposition of transition charges under the Amendatory Act could have a material
adverse impact on the amount of Applicable Rates from which the IFC Charges are
deducted and on the timing of IFC Charges. In any event, no prediction can be
made as to whether these bills, or any future proposed bills to deregulate the
electric industry, will become law or, if they become law, what their final form
or effect will be.
REDUCTION IN AMOUNT OF REVENUE FROM APPLICABLE RATES
Each Transitional Funding Order will include determinations, with which
Illinois Power will concur, to the effect that (a) the imposition of IFC Charges
will not increase the total charges to Illinois Power's Customers over those
that the Customers would pay absent the imposition of IFC Charges and (b) the
IFC Charges will be deducted from and stated separately from the Applicable
Rates charged on each Customer's bill. Therefore, any decline in revenues from
Applicable Rates may have a negative impact on the timing and amount of IFC
Charges and may adversely affect Illinois Power's financial condition and
thereby its ability to provide electric service or to perform its obligations as
Servicer.
Under the Funding Law, the ICC is required to authorize in each Transitional
Funding Order and in each IFC Tariff, and Illinois Power is entitled to
implement, a procedure for periodic prospective adjustments to the IFC Charges
in respect of any over-collection or shortfall in collections of IFC Charges
during prior periods. See "Description of the Intangible Transition
Property--Adjustments to IFC Charges." The Funding Law provides that if, as a
result of any such adjustment, the IFC Charge, as so adjusted, will exceed the
amount per kilowatt-hour of the IFC Charge authorized by the ICC in any
Transitional Funding Order, then Illinois Power shall be obligated to file
Amendatory Tariffs adjusting the amounts otherwise billable by Illinois Power
for Applicable Rates, to offset the amount of such excess (or, if Illinois Power
shall have previously filed any such Amendatory Tariffs, the incremental amount
of such excess). However, although the Funding Law specifically preserves the
right of Illinois Power's Customers to bring actions against Illinois Power for
failure to file such Amendatory Tariff, the failure of such Amendatory Tariff to
become effective for any reason shall not delay or impair the effectiveness of
any such adjustments and the obligation of Customers to pay the IFC Charges, as
adjusted, shall not be subject to any defense, counterclaim or right of set-off
arising as a result of either (a) the failure of Illinois Power to file such
Amendatory Tariff or (b) Illinois Power's failure to perform or provide past,
future or present services.
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There are several provisions of the Amendatory Act (including the provision
requiring the filing of Amendatory Tariffs) which will result in reductions to
the amount of Applicable Rates which Illinois Power will be allowed to bill and
collect from Customers and from which Illinois Power is required to deduct IFC
Charges.
The Amendatory Act required Illinois Power to provide a 15% reduction in
base rates to its residential customers on August 1, 1998, and requires an
additional 5% reduction in base rates to its residential customers on May 1,
2002, based on Illinois Power's rates in effect immediately prior to January 1,
1998. The Amendatory Act also provides that, with one limited exception,
Illinois Power may not request an increase in the base rates that it charges its
retail customers until January 1, 2005. Commencing January 1, 2005, the ICC may,
pursuant to appropriate proceedings, modify Illinois Power's base rates in
accordance with cost of service, and may set the components of any such rates
that are intended to recover power supply costs at the lower of cost of service
or 110% of market price (which modifications could reduce such base rates). In
addition, under the Amendatory Act, the ICC, at Illinois Power's request and
subject to satisfaction of statutory criteria, may declare tariffed services
offered by Illinois Power to be "competitive." If a tariffed service is declared
competitive, Illinois Power is obligated to continue to offer the service as a
tariffed service for three years to those customers who were served on the
tariff on the date the service is declared competitive, but is relieved of the
obligation to offer or provide the service as a tariffed service to any new
customers who otherwise would have been eligible for it. In addition, the
Amendatory Act allows Illinois Power to self-declare a tariffed service (other
than delivery service or the provision of electric power and energy)
"competitive," but only with respect to those customers not then taking the
tariffed service, subject to the authority of the ICC to thereafter review and
revoke such declaration. Charges for a competitive service are not included in
Applicable Rates, thereby reducing the amount of Applicable Rates from which the
IFC Charges must be deducted and available to Illinois Power to offset against
any increase in the IFC Charges as a result of any Amendatory Tariff.
The Amendatory Act allows certain non-residential customers of Illinois
Power to purchase their electricity from other suppliers commencing October 1,
1999, allows all other non-residential customers to purchase their electricity
from other suppliers commencing December 31, 2000, and allows all of Illinois
Power's residential customers to purchase their electricity from other suppliers
commencing May 1, 2002. It is anticipated that most Customers electing to
purchase electricity from other suppliers will find it necessary to purchase
delivery services, which will be a tariffed service, from Illinois Power, and
may be required to pay a transition charge to Illinois Power until December 31,
2006. The transition charge is calculated according to a formula which is
designed to allow Illinois Power to recover a portion, but not all, of the
revenue requirement associated with its generation and power supply costs that
are above market prices. The market prices used in the calculation of the
transition charge are redetermined from year-to-year and it is possible that the
transition charge for some Customers may be zero, in which event the amount of
Applicable Rates from which IFC Charges must be deducted and which are available
to Illinois Power to offset against any increase in the IFC Charges would be
limited by the remaining tariffed charges imposed on such Customers. Moreover,
under the Amendatory Act, the transition charges are designed to decrease over
time, and such reductions may further reduce the amount of such Applicable
Rates. See "Electric Industry Restructuring in Illinois--Transition Charges."
The ICC, on petition by Illinois Power and based on application of statutory
criteria set forth in the Amendatory Act, is authorized to extend the period
during which transition charges may be collected until no later than December
31, 2008. There can be no assurances that the ICC will grant any such request
for extension of the right to collect transition charges. Based on the manner in
which transition charges must be established, as provided in the Amendatory Act,
Illinois Power, until at least December 31, 2004, expects to receive less
revenue from a retail customer who elects to purchase electricity from another
supplier than Illinois Power would receive if the customer continued to purchase
electricity from Illinois Power at base rates. Prior to December 31, 2006, some
customers who have elected to purchase electricity from other suppliers, and
after December 31, 2006, all such customers (unless the ICC grants an Illinois
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Power request for an extension of the authority to collect transition charges)
will no longer pay Illinois Power transition charges, and may pay Illinois Power
only delivery service charges as a rate for tariffed services. It has not been
determined at this time whether delivery service charges will be calculated on a
cents per kilowatt-hour basis. In any event, delivery service charges are
expected to be, on a per kilowatt-hour basis and in the aggregate, materially
lower than Illinois Power's current bundled charges for tariffed services.
In addition, under the Amendatory Act, Utilities (including Illinois Power)
will be required to offer, as a tariffed service, (a) to their non-residential
delivery service customers, certain power purchase options pursuant to which
such customers may purchase electric power and energy from the Utility at the
market-based prices used in the calculation of transition charges and (b) to all
customers, real-time pricing whereby charges for delivered electric power and
energy may vary on an hour-to-hour basis for non-residential retail customers
and may vary on a periodic basis during the day for residential retail
customers. See "Electric Industry Restructuring in Illinois--Amendatory Act
Overview." Such pricing options have generally not existed in the past and,
accordingly, there can be no assurance as to how the offering of such options
might affect the amount of Applicable Rates from which the IFC Charges must be
deducted and which are available for Illinois Power to offset against any
increase in the IFC Charges as a result of an Amendatory Tariff.
A customer which obtains its electricity from its own cogeneration or
self-generation facilities and does not purchase any electricity or take
delivery services or any other tariffed services from Illinois Power will not
pay transition charges or other tariffed charges on the electricity it obtains
from such facilities and thus will not be obligated to pay IFC Charges with
respect to that electricity. Even if such a customer were to continue purchasing
some but not all of its electricity from Illinois Power, the amount of
electricity which the customer purchases from Illinois Power, and therefore the
amount of IFC Charges the customer is obligated to pay, would be less than if
the customer were purchasing all of its electricity from Illinois Power. Certain
electricity consumers in the State of Illinois and certain entities involved in
the sale, installation, operation and sale of fuel for cogeneration and
self-generation facilities have taken the position that the phrase "customer's
own cogeneration or self-generation facilities" for purposes of the Amendatory
Act should be interpreted to include, among other things (i) facilities which
are not located on the customer's premises, (ii) facilities which are owned by a
third party and leased to the customer, (iii) facilities which are operated for
the customer by a third party, (iv) a customer's ownership or leasehold interest
in a portion of a facility which, in its entirety, is larger than required to
serve the electrical needs of the customer, and the remaining portion of which
is used to serve other customers or to make wholesale or retail sales of
electricity to other customers or third parties, and (v) facilities from which
sales of electricity not needed to serve the electricity requirements of the
particular customer are made to other customers or third parties. Illinois Power
and certain other entities have disagreed with this interpretation as overbroad
and contrary to the terms of the Amendatory Act. Nonetheless, if the Illinois
Legislature, a court, or the ICC were to agree with such an interpretation, in
whole or in part, and adopt a conforming amendment to the Act or enter a binding
decision to such effect, then the number and extent of installation of
cogeneration or self-generation facilities (as so defined) may increase, and the
amount of electricity usage by Customers installing such facilities and the
amount of Applicable Rates from which IFC Charges must be deducted and which are
available for Illinois Power to offset against an increase in IFC Charges as a
result of an Amendatory Tariff, may be reduced. On November 18, 1998, the ICC
granted a request for a declaratory ruling to the effect that an entity
installing a cogeneration facility on a customer's premises in Commonwealth
Edison Company's service area which facility is to be owned by such entity and
the output thereof provided to the customer, and which facility also has
attributes (iii) and (v) listed above, is not an ARES. Consequently, the
electrical output obtained by the customer from such a facility, if constructed
in Illinois Power's service area, would not be subject to Applicable Rates.
However, any electricity delivered to a retail Customer by Illinois Power from a
privately-owned generation facility, using Illinois Power's transmission or
distribution system, would be subject to delivery charges and transition charges
and therefore to IFC Charges.
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As a result of the statutory provisions and the events described in the
preceding six paragraphs, the total amount of Applicable Rates which Illinois
Power will be entitled, and can expect, to collect from its Customers may
decline materially over the period between issuance and maturity of the Notes.
To the extent any decline in tariffed revenues is supplanted by revenues from
contracts between Illinois Power and Customers who would otherwise have been
obligated to pay tariffed revenues and, therefore, would have been obligated to
pay IFC Charges, however, the Transitional Funding Orders will prohibit Illinois
Power from entering into such contracts unless the Customers expressly agree to
pay the Grantee or the Trust, or Illinois Power as Servicer, an amount equal to
the amount of IFC charges that would have been billed if the services taken by
such Customers under such contracts had continued to be taken under tariff. In
addition, each Transitional Funding Order and the Servicing Agreement will
provide that, if the IFC Charges to be imposed on any IFC Customer Class in an
Applicable Period exceed the total projected revenues for such class in such
Applicable Period, the deficiency shall be allocated among all remaining IFC
Customer Classes. There can nonetheless be no assurance that any decline in
revenues would not have a negative impact on the amount and timing of IFC
Payments, and on the ability of Illinois Power to offset against any increase in
the IFC Charges as a result of an Amendatory Tariff, nor can there be any
assurance that any decline in overall revenues would not have a material adverse
affect on Illinois Power's financial condition and thereby its ability to
provide electric service or to perform its obligations as Servicer.
In addition, if the amount of Illinois Power's Applicable Rates has been
reduced to such a low level that Illinois Power cannot offset adjusted IFC
Charges against such Applicable Rates and fails to file an Amendatory Tariff,
Illinois Power may become subject to actions by Customers, as described in the
second paragraph in this section, and no assurance can be given that such
actions may not adversely affect the Noteholders. Furthermore, under Illinois
Power's servicing procedures, in the event that total IFC Charges for a
particular Customer during a particular Billing Period were to exceed otherwise
Applicable Rates for such Customer, the Customer would only be billed IFC
Charges for the amount of Applicable Rates against which such IFC Charges could
then be offset. If the above-described circumstances occur, such a limitation on
amounts billed to individual Customers could result in payment delays on the
Notes, notwithstanding the ability of the Servicer to allocate any deficiency in
IFC Charges with respect to one IFC Customer Class to the remaining IFC Customer
Classes, as discussed above. See "Servicing."
Illinois Power does not expect, taking into consideration the current
authorized levels of IFC Charges and anticipated future issuances of Notes, that
any decline in revenues would result in a limitation on the timing or the
overall amount of the IFC Charges payable by Customers. See "The
Servicer--Illinois Power Customer Base, Electric Energy Consumption and Base
Rates" and "Servicing."
BANKRUPTCY AND CREDITORS' RIGHTS ISSUES
POSSIBLE ADVERSE EFFECT ON NOTEHOLDERS AS A RESULT OF THE BANKRUPTCY OF
ILLINOIS POWER, THE GRANTEE OR THE TRUST. If Illinois Power or the Grantee were
to become a debtor in a bankruptcy case, and a creditor or bankruptcy trustee of
Illinois Power or the Grantee, or Illinois Power or the Grantee itself as
debtor-in-possession, were to take the position that the Intangible Transition
Property constituted property of Illinois Power's or the Grantee's bankruptcy
estate, and a court were to adopt such a position, then delays or reductions in
payments on the Notes could result. Regardless of any specific adverse
determinations in an Illinois Power, Grantee or Trust bankruptcy proceeding, the
mere fact of an Illinois Power, Grantee or Trust bankruptcy proceeding could
have an adverse effect on the secondary market for the Notes, including an
adverse effect on the liquidity and market value of the Notes.
Illinois Power, the Grantee and the Trust have taken steps to minimize the
risk that a creditor or bankruptcy trustee of Illinois Power or the Grantee or
Illinois Power or the Grantee itself would succeed on such a claim. For example,
the Grantee will represent and warrant in each Sale Agreement that the transfer
of the Intangible Transition Property by the Grantee to the Trust pursuant to
such Sale Agreement constitutes a sale and absolute transfer of such Intangible
Transition Property, including amounts deemed
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to be Intangible Transition Property pursuant to the related Transitional
Funding Order, from the Grantee to the Trust. Illinois Power will also represent
and warrant in the Basic Documents that the vesting of the Intangible Transition
Property in the Grantee shall be irrevocable and enforceable against Illinois
Power and that it has no right, title and/or interest in the Intangible
Transition Property nor in the portion of the Applicable Rates otherwise to have
been received by Illinois Power to the extent such portion has become IFC
Charges in accordance with the terms and provisions of the related Transitional
Funding Order. Illinois Power, the Grantee and the Trust will also covenant in
the Basic Documents that they will each take all appropriate actions to perfect
the Indenture Trustee's security interest in the Intangible Transition Property
and the other Note Collateral. Further, the Funding Law provides that a sale,
assignment or other transfer of intangible transition property in a transaction
approved by a transitional funding order, which is expressly stated in the
documents governing the transaction to be a sale or other absolute transfer,
shall be treated as an absolute transfer of all the transferor's right, title
and interest in, to and under such intangible transition property which places
such transferred property beyond the reach of the transferor or its creditors.
Illinois Power, the Grantee and the Trust will, therefore, treat the
transactions as an absolute transfer under applicable law, although for
financial reporting and federal income tax purposes the transactions will be
treated as debt of Illinois Power. See "--Potential Servicing Issues--Possible
Payment Delays Caused by Commingling of IFC Payments with Servicer's Other
Funds."
If Illinois Power were to become a debtor in a bankruptcy case and a court
were to order that the assets and liabilities of the Trust or the Grantee should
be consolidated with those of Illinois Power, delays or reductions in payments
on the Notes would likely result. Illinois Power, the Grantee and the Trust have
taken steps to minimize the risk of such a consolidation. The major step is
that, instead of the Intangible Transition Property being transferred directly
from Illinois Power to the Grantee, the Funding Law permits, and each
Transitional Funding Order will provide, that the Intangible Transition Property
created by such Transitional Funding Order is vested directly in the Grantee and
is not subject to defense, counterclaim or right of setoff as a result of
Illinois Power's failure to perform or provide past, present or future services.
Additional steps include the fact that the Grantee is a separate, special
purpose limited liability company, subject to the direction of a management
committee, at least two of whose members must be independent from Illinois
Power, and the organizational documents of which provide that it shall not
commence a voluntary bankruptcy case without the unanimous affirmative vote of
all of its managers and that the Trust is a distinct entity managed by the
Delaware Trustee. Nonetheless, those steps may not be completely effective.
Should any transfer of the Intangible Transition Property to the Trust be
recharacterized in a bankruptcy proceeding as a borrowing by Illinois Power or
the Grantee, the Funding Law provides that, subject to certain required filings
with the ICC which Illinois Power must make at the time the Notes are issued,
there is a perfected first priority statutory lien on the Intangible Transition
Property that secures all obligations to the holders of the Notes.
Pursuant to the Funding Law and each Transitional Funding Order, upon any
issuance of Notes, the Intangible Transition Property identified in such
Transitional Funding Order constitutes a current property right and it
thereafter continuously exists as property for all purposes. Nonetheless, no
assurances can be given that if Illinois Power, the Grantee or the Trust were to
become the debtor in a bankruptcy case, a creditor of, or a bankruptcy trustee
for, Illinois Power, the Grantee or the Trust, or Illinois Power, the Grantee or
the Trust itself as debtor in possession would not attempt to take the position
that, because the payments based on the IFC Charges are usage-based charges,
Intangible Transition Property comes into existence only as Customers use
electricity or, in the case of Customers agreeing to pay amounts equivalent to
IFC Charges under contracts, as such Customers enter into such contracts or use
electricity. Any such party might similarly argue, to the extent that any
condemnation or FERC stranded cost recoveries which include amounts for lost
tariffed revenues are awarded from and after commencement of a bankruptcy by or
against Illinois Power, that such amounts came into existence only as such
recoveries were awarded, notwithstanding the provisions of the Servicing
Agreement which provide that a portion of such awards
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should be allocable to the Trust as proceeds of Intangible Transition Property.
If a court were to adopt any of the foregoing positions, no assurances can be
given that the statutory lien created by the Funding Law would attach to IFC
Collections in respect of electricity consumed after the commencement of a
bankruptcy case by or against Illinois Power, the Grantee or the Trust or in
respect of IFC Payments received under contracts entered into after the
commencement of such case. If it were determined that the Intangible Transition
Property has not been sold to the Trust, and that the statutory lien created by
the Funding Law does not attach to collections of IFC Payments in respect of
electricity consumed after the commencement of a bankruptcy case for Illinois
Power, the Grantee or the Trust, then the Indenture Trustee, as Trustee for the
Noteholders, would be an unsecured creditor of Illinois Power, the Grantee or
the Trust, as the case may be, and delays or reductions in payments on the Notes
could result. Whether or not the court determined that the Intangible Transition
Property had been sold to the Trust, no assurances can be given that the court
would not rule that any IFC Payments relating to electricity consumed after the
commencement of Illinois Power's, the Grantee's or the Trust's bankruptcy cannot
be transferred to the Indenture Trustee, thus resulting in delays or reductions
in payments on the Notes.
Because the IFC Charges are usage-based charges, if Illinois Power or the
Grantee were to become the debtor in a bankruptcy case, a creditor of, or a
bankruptcy trustee for, Illinois Power or the Grantee, or Illinois Power or the
Grantee itself as debtor in possession could take the position that the Trust
should pay a portion of the costs of Illinois Power associated with the
generation, transmission, or distribution by Illinois Power of the electricity
whose consumption gave rise to the IFC Collections that are used to make
distributions on the Notes. If a court were to adopt this position, the result
could initially be a reduction in the amounts paid to the Trust, and thus to the
holders of the Notes. Although the IFC Charges may be adjusted by the Servicer,
delays in implementation thereof may cause a delay in receipt of IFC Collections
sufficient to pay interest and make Scheduled Payments on the Notes.
In addition, if Illinois Power were to become the debtor in a bankruptcy
case, a creditor of, or a bankruptcy trustee for Illinois Power, or Illinois
Power itself as debtor-in-possession, could take the position that the
bankruptcy trustee is not bound prospectively by the provisions of a
Transitional Funding Order requiring that Illinois will not enter into any
contracts with any Customer obligated (or who would but for such contract, be
obligated) to pay IFC Charges if, as a result thereof, the Customer would not
receive services subject to Applicable Rates, unless such contract provides that
the Customer will pay an amount to the Grantee or its assigns, or to Illinois
Power, as Servicer, as applicable, equal to the amount of IFC Charges that would
have been billed if the services provided under such contract were subject to
Applicable Rates. If a court were to adopt this position, the result could be a
further reduction in the amounts available to be paid to the Trust, and thus to
the holders of the Notes.
Regardless of whether Illinois Power, the Grantee or the Trust is the debtor
in a bankruptcy case, if a court were to accept the arguments of a creditor of
Illinois Power, the Grantee or the Trust that Intangible Transition Property
and/or related assets come into existence only as Customers use electricity, a
tax or government lien or other nonconsensual lien on property of Illinois Power
arising before the Intangible Transition Property and/or related assets came
into existence may have priority over the Trust's or the Noteholders' interest
in such Intangible Transition Property or related assets, thereby possibly
initially resulting in a reduction of amounts paid to the holders of the Notes.
Although the IFC Charges may be adjusted by the Servicer, delays in
implementation thereof may cause a delay in receipt of IFC Collections
sufficient to pay interest and make Scheduled Payments on the Notes.
POSSIBLE ADVERSE EFFECT ON NOTEHOLDERS AS A RESULT OF THE BANKRUPTCY OF THE
SERVICER. The bankruptcy or insolvency of the Servicer could result in delays
or reductions in the payments due on the Notes.
If the Servicer (a) maintains a short-term debt rating of at least "A-1" by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), "P-1"
by Moody's Investors Service, Inc. ("Moody's"), if rated by Duff & Phelps Credit
Rating Co. ("Duff & Phelps"), "D-1" by Duff & Phelps and, if rated by Fitch,
IBCA, Inc. ("Fitch"), "F-1" by Fitch, and (b) meets certain other conditions
(collectively, the
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"Monthly Remittance Conditions"), the Servicer will be entitled to commingle IFC
Payments with its own funds until the relevant Monthly Remittance Date. If the
Monthly Remittance Conditions are not met, then the Servicer will remit all IFC
Payments to the Collection Account within two Servicer Business Days of
collection. For these purposes, IFC Payments are deemed collected when posted to
a customer's account (which under the Servicer's current procedures occurs
within two Servicer Business Days of receipt of payment by the Servicer). In the
event of a bankruptcy of the Servicer, under normal principles of the Uniform
Commercial Code in effect in the State of Illinois (the "UCC"), the Indenture
Trustee likely would not have a perfected interest in such commingled funds and
the inclusion thereof in the bankruptcy estate of the Servicer may result in
delays or reductions in payments due on the Notes.
Although (a) the Funding Law provides that both the property interest of the
Trust in the Intangible Transition Property and the security interest of the
Indenture Trustee in such Intangible Transition Property shall not be defeated
by the commingling of revenues arising from such Intangible Transition Property
with funds of Illinois Power or the Grantee and (b) each Transitional Funding
Order will provide that, in the case of any such commingled revenues,
collections, claims, payments, money or proceeds, the portion allocable to the
IFC Charges may be determined by such reasonable methods of estimation as are
set forth in the Servicing Agreement, if Illinois Power were unable to trace or
otherwise identify the IFC Collections held by it and were subsequently to
become a debtor in a bankruptcy case, a creditor or bankruptcy trustee of
Illinois Power or Illinois Power itself as debtor-in-possession could take the
position that the Noteholders' property interest in such commingled and no
longer identifiable IFC Collections had been lost and that the Noteholders' sole
claim in respect of such unidentifiable property would be an unsecured claim
against Illinois Power.
Furthermore, if the Servicer is in bankruptcy, it may stop performing its
functions as Servicer and it may be difficult to find a third-party to act as
Successor Servicer. See "--Potential Servicing Issues-- Possible Payment Delays
Caused by Commingling of IFC Payments with Servicer's Other Funds."
NATURE OF THE NOTES
LIMITED LIQUIDITY. There is no assurance that a secondary market for any of
the Notes will develop or, if one does develop, that it will provide the
Noteholders with liquidity of investment or that it will continue for the life
of such Notes. It is not anticipated that any Notes will be listed on any
securities exchange.
RESTRICTIONS ON BOOK-ENTRY REGISTRATION. The Notes will be initially
represented by one or more Notes registered in Cede's name, as nominee for DTC,
and will not be registered in the names of the Noteholders or their nominees.
Therefore, unless and until Definitive Notes are issued, Noteholders will not be
recognized by the Indenture Trustee as Noteholders. Hence, until such time,
Noteholders will only be able to receive distributions from, and exercise the
rights of Noteholders indirectly through, DTC and participating organizations,
and, unless a Noteholder requests a copy of any such report from the Indenture
Trustee or the Servicer, will receive reports and other information provided for
under the Servicing Agreement only if, when and to the extent provided to
Noteholders by DTC and its participating organizations. In addition, the ability
of Noteholders to pledge Notes to persons or entities that do not participate in
the DTC system, or otherwise take actions in respect of such Notes, may be
limited due to the lack of physical notes for such Notes. See "Description of
the Notes--Book-Entry Registration."
LIMITED SOURCES OF PAYMENT FOR THE NOTES AND LIMITED CREDIT
ENHANCEMENT. The Notes are limited-recourse obligations, and the sole source of
payments thereon is the payments made with respect to the Intangible Transition
Property and the other Note Collateral (which is expected to be relatively
small) and, for Floating Rate Notes, the proceeds of any Swap Agreement. It is
anticipated that the Note Collateral, which is described under "Security for the
Notes--Security Interest in Note Collateral" herein, will, with the limited
exceptions specified therein, constitute the Trust's only assets and there will
be no forms of credit enhancement for the Notes except for amounts held in the
Overcollateralization Account and the Capital Subaccount and the right of the
Trust to compel Illinois Power, as Servicer, to make Adjustments
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to the IFC Charges. It is not currently anticipated that the Notes will have the
benefit of any third-party credit enhancement, such as guarantees, letters of
credit, insurance or the like. If, however, any Series of Notes is to be issued
with any third-party credit enhancement, it will be set forth in the related
Prospectus Supplement. The Trust's organizational documents will restrict its
right to acquire other assets unrelated to the transactions described herein.
The Notes will not constitute a debt, liability or other obligation of the
State of Illinois or of any political subdivision, agency or instrumentality
thereof and will not represent an interest in or obligation of Illinois Power or
its affiliates. None of the Notes or the underlying Intangible Transition
Property will be guaranteed or insured by Illinois Power or its affiliates.
Transitional Funding Orders authorizing issuance of the Notes do not constitute
a pledge of the full faith and credit of the State of Illinois or of any of its
political subdivisions. The issuance of the Notes under the Funding Law shall
not directly, indirectly or contingently obligate the State of Illinois or any
political subdivision thereof to levy or to pledge any form of taxation therefor
or to make any appropriation for their payment.
EFFECT OF ADDITIONAL SERIES OF NOTES OR OTHER TRANSITIONAL FUNDING ORDERS ON
OUTSTANDING NOTES. The issuance of additional Series of Notes may have an
adverse effect on the timing or amount of payments received by a Noteholder of
outstanding Notes. Under the Basic Documents, the Trust will have the right,
subject to Illinois Power's seeking and obtaining one or more subsequent
Transitional Funding Orders from the ICC, to issue one or more subsequent Series
of Notes on or after August 1, 1999 in an additional amount of up to
approximately $1.728 billion in aggregate principal amount, less the initial
principal amount of previously issued Notes. Any such subsequent Series of Notes
which increases the cumulative amount of issued Notes above $864 million would
be issued in connection with the creation of additional Intangible Transition
Property under such subsequent Transitional Funding Order and such subsequent
Notes will have no more than a PARI PASSU lien on the Note Collateral, including
all additional Intangible Transition Property, vis-a-vis all previously issued
and outstanding Series of Notes. The terms of any such Series of Notes will be
specified in a supplement to the Indenture or a Trust issuance certificate, and
described in the related Prospectus Supplement. The provisions of the supplement
to the Indenture or Trust issuance certificate and the terms of any additional
Series of Notes will not be subject to the prior review or consent of holders of
the Notes or Notes of any previously issued Series. The terms of an additional
Series of Notes may include, without limitation, the matters described under
"Description of the Notes--General." The ability of the Trust to issue any
additional Series of Notes is subject to the condition, among others, that such
issuance will not result in any Rating Agency reducing or withdrawing its then
existing rating of the Notes of any outstanding Class (the "Rating Agency
Condition"). There can be no assurance, however, that the issuance of any other
Series of Notes, including any Series issued from time to time hereafter, might
not have an impact on the timing or amount of payments received by a Noteholder.
See "Description of the Notes--Conditions of Issuance of Additional Series and
Acquisition of Subsequent Intangible Transition Property." In addition, various
matters relating to the Notes are subject to a vote of all Noteholders for all
Series and Classes of Notes, even though there may be differences in the
interests or positions among such Series or Classes which could result in voting
outcomes adverse to the interests of one or more Series or Classes of Notes.
Moreover, the Basic Documents do not prohibit Illinois Power from seeking
Transitional Funding Orders under the Funding Law which would create intangible
transition property in favor of a party other than the Grantee.
Issuance of an additional Series of Notes and/or creation of additional
intangible transition property will require imposition and collection of
additional Instrument Funding Charges from Customers. This may increase the
risks to Noteholders as described above, in particular those risks described
under "--Reduction in Amount of Revenue From Applicable Rates," "--Limit on
Amount of Intangible Transition Property Available to Pay Notes," "--Potential
Servicing Issues," "--Uncertainties Related to the Electric Industry Generally,"
and "--Bankruptcy and Creditors' Rights Issues."
LIMITED NATURE OF RATINGS. It is a condition of issuance of each Class of
Notes that they receive from the Rating Agencies the respective ratings set
forth in the applicable Prospectus Supplement. The ratings
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of the Notes address the likelihood of the ultimate payment of principal and the
timely distribution of interest on the Notes. The ratings do not represent an
assessment of the likelihood that the rate of IFC Collections might differ from
that originally anticipated; as a result of such differences, any Series or
Class of Notes might mature later than scheduled, resulting in a weighted
average life of such Notes which is more than expected. A security rating is not
a recommendation to buy, sell or hold securities. There can be no assurance that
a rating will remain in effect for any given period of time or that a rating
will not be revised or withdrawn entirely by a Rating Agency if, in its
judgment, circumstances so warrant.
UNCERTAIN PAYMENT AMOUNTS AND WEIGHTED AVERAGE LIFE. The actual dates on
which principal is paid on each Class of Notes might be affected by, among other
things, the amount and timing of receipt of IFC Collections. Since each IFC
Charge will consist of a charge per kilowatt hour allocated to the applicable
class of Customers, the aggregate amount and timing of receipt of IFC
Collections (and the resulting amount and timing of principal amortization on
the Notes) will depend, in part, on actual usage of electricity by Customers and
the rate of delinquencies and write-offs. See "--Potential Servicing Issues--
Possible Payment Delays Caused by Inaccurate Usage and Credit Projections" and
"--Possible Payment Delays Caused by Reliance on Alternative Retail Electric
Suppliers and Other Third-Party Collectors." Although the amount of the IFC
Charges will be adjusted from time to time based in part on the actual rate of
IFC Collections, no assurances can be given that the Servicer will be able to
forecast accurately actual Customer energy usage and the rate of delinquencies
and write-offs and implement adjustments to the IFC Charges that will cause IFC
Payments to be made at any particular rate. If IFC Collections are received at a
slower rate than expected, payments on a Note may be made later than expected.
Because principal will only be paid at a rate not to exceed that set forth in
the Expected Amortization Schedules, except if an Event of Default occurs and
the Notes are declared due and payable or in the event of an early optional
redemption, the Notes are not expected to be retired earlier than scheduled. A
payment on a date that is earlier than forecasted will result in a shorter
weighted average life, and a payment on a date that is later than forecasted
will result in a longer weighted average life. See "Certain Payment, Weighted
Average Life and Yield Considerations" and "Description of the Intangible
Transition Property--Adjustments to IFC Charges."
EFFECT OF OPTIONAL REDEMPTION ON WEIGHTED AVERAGE LIFE AND YIELD. As
described more fully under "Description of the Notes--Optional Redemption," any
Series of Notes may be redeemed on any Payment Date if, after giving effect to
payments that would otherwise be made on such date, the outstanding principal
balance of such Series of Notes has been reduced to less than five percent (5%)
of the initial outstanding principal balance thereof. In addition, if specified
in the Prospectus Supplement related to any Series or Class of Notes, such
Series or Class of Notes may be redeemed in full on any Payment Date on or prior
to December 31, 2004 using proceeds received from the refinancing of any other
Series or Class of Notes through the issuance of an additional Series of Notes.
Finally, a Series of Notes shall be subject to redemption if and to the extent
provided in the related Prospectus Supplement. Redemption will cause such Notes
to be retired earlier than would otherwise be expected, and if the payment
schedule otherwise does not differ from that originally anticipated, will result
in a shorter than expected weighted average life for such Notes. Such a
redemption may also adversely affect the yield to maturity of the Notes. There
can be no assurance as to whether the Trust will optionally redeem any Series of
Notes, or as to whether Noteholders will be able to receive an equally
attractive rate of return upon reinvestment of the proceeds resulting from any
such redemption.
ADDITIONAL RISKS OF FLOATING RATE NOTES. The liquidity and the market value
of any Floating Rate Notes may be adversely affected by a termination event
under the related Swap Agreement as described in the related Prospectus
Supplement.
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ELECTRIC INDUSTRY RESTRUCTURING IN ILLINOIS
GENERAL
The electric utility industry is experiencing intensifying competitive
pressures, in both the wholesale generation market and, in many states,
including Illinois, in the retail market. Historically, electric utilities
operated as regulated monopolies in their service territories and were the
primary suppliers of electricity. In Illinois, Utilities' rates were set by the
ICC based on the Utilities' costs of providing services and a reasonable return
on their prudent capital investments. Changes to this traditional legal and
regulatory framework and market structure are occurring at both the federal and
state levels.
AMENDATORY ACT OVERVIEW
In Illinois, dramatic changes in the retail electricity market will be
occurring over the next ten years as a result of enactment of Public Act 90-561
(the "Amendatory Act"), which became law on December 16, 1997 after being
approved by a vote of 108-7 in the Illinois House of Representatives and 57-2 in
the Illinois Senate. Utilities, such as Illinois Power, will be required to
provide to customers in their service areas, on a regulated basis, delivery
services through which a customer can purchase electricity from other suppliers
and have it delivered by the local Utility to the customer's premises. Beginning
October 1, 1999, Utilities will be required to offer delivery services to (a)
all customers in a Utility's service area with electric loads at a single site
of 4 megawatts or greater, (b) commercial customers in the Utility's service
area with at least 10 sites under common ownership whose electric loads total at
least 9.5 megawatts, up to 3.5% of the Utility's peak load and (c) customers in
non-residential service classes whose usage constitutes one-third of the
Utility's remaining (I.E., excluding customers in groups (a) and (b))
kilowatt-hour sales in each such class, with the customers in groups (b) (if
necessary) and (c) to be selected by lottery or other random non-discriminatory
process. As of December 31, 2000, all non-residential customers in a Utility's
service area will be entitled to delivery services. All residential customers in
a Utility's service area will be entitled to delivery services beginning May 1,
2002. The local Utility will be required to provide delivery services to
eligible customers on a non-discriminatory basis regardless of the customer's
choice of electricity provider. The Utility will be compensated for providing
delivery services through rates set by the ICC to recover the costs of owning,
operating and maintaining the Utility's transmission and distribution
facilities. Under the Amendatory Act, Utilities also will be required to offer
as a tariffed service to their non-residential delivery service customers,
certain power purchase options pursuant to which such customers may purchase
electric power and energy from the Utility at market-based rates determined by
formulas set forth in the Amendatory Act. In addition, the Amendatory Act
requires Utilities, including Illinois Power, to offer, as a tariffed service,
real-time pricing to non-residential customers beginning October 1, 1998, and to
residential customers beginning October 1, 2000, pursuant to which tariff
kilowatt-hour charges for delivered electric power and energy may vary on an
hour-to-hour basis for non-residential retail customers and on a periodic basis
during the day for residential retail customers.
TRANSITION CHARGES
Another change involves the ability of a Utility to collect "transition
charges" from those customers in its service area who obtain electricity from an
alternate provider. Until December 31, 2006, the Utility will be entitled,
pursuant to tariff, to collect transition charges from delivery services
customers and include such transition charges in its bills to such customers.
These periodic transition charges are only applicable to customers obtaining
electricity from an ARES or from another Utility, and are not applicable to
customers taking traditional tariffed service from the Utility, or to a customer
to the extent it obtains its electricity from its own cogeneration or
self-generation facility. Transition charges are to be calculated annually for
each customer class and, for larger customers, on an individual customer basis.
The per kilowatt-hour transition charge applicable to a customer class or an
individual customer is calculated as follows using the class' or customer's
usage during a three-year period prior to the date the customer became eligible
for delivery service: (1) the revenues the Utility would receive based on the
applicable
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tariffed base rate (adjusted for specific changes set forth in the Amendatory
Act including, in the case of residential customers, for the mandated rate
reductions described below) or contract rate, less (2) the revenues the Utility
would receive for delivering the same amount of usage, based on its currently
applicable delivery service rates, less (3) the market value of the capacity and
energy of the Utility that it would have used to supply the class or customer's
electric power and energy requirements, with the "market value" determined
through an ICC-approved tariff using market-based data as determined through a
market index or by a neutral fact-finder retained annually by the ICC, less (4)
a further specific deduction, referred to as the "mitigation factor," which is
set forth in the Amendatory Act for each year in the relevant period and which
increases over that period. If the foregoing calculation results in a negative
number, the transition charge will be zero. The product of the foregoing
calculation is divided by the class' or customer's kilowatt-hour usage during
the three-year base period to yield a transition charge expressed in cents per
kilowatt-hour, which is charged on every kilowatt-hour delivered by the electric
utility for the delivery services customer until December 31, 2006. However,
depending on the levels of "market prices" which are determined from
year-to-year and the relationship between a class' or customer's existing base
rates or contract rate and the "market prices," and given the increases in the
"mitigation factors" over the relevant period as specified in the Amendatory
Act, it is likely that for some customers, and possible that for all customers,
the transition charge will be zero prior to December 31, 2006. A Utility may
petition the ICC to allow it to collect transition charges for an additional
period not to extend beyond December 31, 2008. The ICC must apply criteria
specified in the Amendatory Act to the Utility's request, and may deny the
request, may authorize the Utility to collect transition charges for some or all
of the additional two year period, in which case the mitigation factor
deductions are increased over those applicable for the year 2006, or in granting
such authority, may impose additional reductions on the allowable transition
charges. The reduction in transition charge revenues which the Utility is likely
to experience over the period from 1999 to 2006 or 2008 will reduce the total
revenues of the Utility from which IFC Charges may be deducted. See "Risk
Factors--Reduction in Amount of Revenue From Applicable Rates."
In addition to the periodic transition charge from delivery services
customers who obtain electricity from an alternate provider described above, a
Utility shall also be entitled, pursuant to tariff, to collect transition
charges from customers in such Utility's service area who obtain electricity
from an alternate provider and do not take delivery services from such Utility.
As with the periodic transition charges described above, these transition
charges are only applicable to customers in its service area obtaining
electricity from an alternate provider and not to customers who obtain their
electricity from their own cogeneration or self-generation facility. These
transition charges shall be calculated in the same manner set forth above for
the entire period of time that the customer would be obligated to pay transition
charges if it were taking delivery services, except that no deduction for
delivery services shall be made in such calculation, and usage data from such
customers' class shall be used where historical usage data is not available for
such customer. These customers are obligated to pay such transition charges on a
lump-sum basis on or before the date such customer begins to take electricity
from an alternate provider; PROVIDED, HOWEVER, that the Utility is to offer such
customer the option of paying such transition charges to such Utility ratably
over the period in which the transition charges would otherwise have applied
pursuant to a contract between such customer and such Utility, in which case the
IFC Charges would be deducted and stated separately from the transition charges.
The transition charge formula is designed to allow the Utility to recover a
portion, but not all, of the revenue requirement associated with its generation
and power supply costs that are above market prices. Transition charges for any
customer or group of customers will be recalculated annually based on changes in
market prices, changes in delivery service rates and changes in the "mitigation
factor" specified in the Amendatory Act, and there will be no retroactive
adjustments to compensate the Utility if transition charge revenues during any
period were less than expected. In order to realize the same overall revenue
stream from a customer who switches to another electricity supplier as it would
have realized if the customer had not switched, the Utility must successfully
remarket the electrical capacity and energy that is no longer needed to serve
the customer, at a price at least as high as the "market price" used to
calculate
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the customer's transition charges; and must otherwise reduce its costs by, or
develop other revenue sources equal to, an amount at least as high as the amount
of the "mitigation factor" used in calculating the customer's transition charge.
Otherwise, the revenue received by the Utility from delivery charges and
transition charges, both of which are tariffed revenues from which IFC Charges
can be deducted, will be less than the revenue the Utility would have received
from the customer at existing tariffed rates for traditional tariffed services.
On and after the date that the Utility is no longer able to collect transition
charges from delivery services customers, and may only collect delivery service
charges, the Utility's tariffed revenues from customers previously paying such
transition charges will decline. In addition, beginning in 1999, the ICC is
authorized under the Amendatory Act to require a Utility to unbundle components
of its delivery service, such as metering services or billing services, and
offer the unbundled components to customers separately, thereby enabling the
customer to purchase the unbundled service from an alternative provider. If
alternative providers enter the service area to compete for the provision of
unbundled delivery service components, it is likely that the Utility will be
able to obtain an ICC declaration that the unbundled service is "competitive"
through the process described below. Unbundling of delivery service components
and the declaration of such components as "competitive" may result in further
declines in the Utility's tariffed revenues. See "Risk Factors--Reductions in
Amount of Revenue from Applicable Rates."
TRANSITION PERIOD
While Utilities are required under the Amendatory Act to offer delivery
services in accordance with the schedule and requirements described above, they
are also required to continue to offer each of their existing, tariffed bundled
services to customers in the Utility's service area until the service is
declared competitive by the ICC. A Utility may petition the ICC to declare a
service "competitive," but may not do so with respect to the provision of power
and energy service for residential and small commercial (defined as a
nonresidential using less than 15,000 kilowatt-hours per year) customers until
such customers are no longer paying transition charges, and may not do so for
any other customer class or segment until after such customers are eligible for
delivery services. The ICC is to evaluate the Utility's request based on
criteria, specified in the Amendatory Act, which are tied to the existence of
other providers of the service. If the ICC declares the provision of power and
energy to residential or small commercial customers "competitive," the Utility
must continue to offer tariffed, fully-bundled service to such customers, but
may provide the power and energy component of the fully bundled service on the
basis of market prices determined in a manner specified in the Amendatory Act.
If the ICC declares the provision of a tariffed service provided to any other
customer class or segment "competitive," the Utility (a) is no longer required
to offer the service on a tariffed basis to new customers, (b) must continue to
provide the service on a tariffed basis for three more years to those customers
who were taking the tariffed service on the date it was declared competitive,
and (c) after the three-year period, is no longer required to offer the service
on a tariffed basis to any customers. Accordingly, any such declaration may
diminish the amount of the Utility's tariffed revenues. See "Risk
Factors--Reduction in Amount of Revenue From Applicable Rates."
During the period that non-residential delivery service customers are paying
transition charges, a Utility is required to offer, by tariff, to sell
electricity to those customers at the same market prices that were used in
determining the customers' transition charges. This service must also be
offered, with some modifications, after payment of transition charges has
stopped, until the sale of electricity to these customers is declared
competitive. This service is a tariffed service, therefore, instrument funding
charges may be deducted from the charges for this service.
During the "mandatory transition period" provided by the Amendatory Act
(which lasts until December 31, 2004), Utilities are precluded, with one limited
exception, from requesting authority from the ICC to increase their base rates;
and the ICC is precluded from ordering on its own motion a Utility to reduce its
base rates. These prohibitions do not apply to delivery service rates. However,
Utilities are required to reduce their base rates to residential customers by
specified amounts on specified dates. For Illinois Power, the required reduction
in residential base rates is 15% effective August 1, 1998, and an
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additional 5% effective May 1, 2002. The residential rate reductions are based
on Illinois Power's base rates that were in effect immediately prior to January
1, 1998, even though those base rates were reduced on March 6, 1998, in
connection with Illinois Power's elimination of its fuel adjustment clause.
Further, during the mandatory transition period, a Utility is allowed to reduce
any rate for tariffed service by giving seven days notice to the ICC. In
addition, during the mandatory transition period, if a Utility's two-year
average rate of return on common equity exceeds the two-year average of the
yields on 30-year U.S. Treasury bonds plus, for the years 1998-1999, 550 basis
points and for the years 2000-2004, 650 basis points, the Utility must refund
50% of the dollar amount of such excess earnings during the ensuing year through
cents-per-kilowatt hour credits on the bills of both its bundled tariff service
customers and its delivery services customers. Implementation of the residential
rate reductions required by the Amendatory Act, and of any other reductions in
tariffed rates voluntarily implemented by an electric utility, will reduce the
Utility's tariffed revenues. See "Risk Factors--Reduction in Amount of Revenue
From Applicable Rates."
After December 31, 2004, a Utility may again request increases in its base
rates for bundled tariffed services, and the ICC is again authorized to
investigate and order reductions in the Utility's base rates, in each case based
on cost of service principles. However, if the ICC finds that the rates for the
generation component of a bundled tariffed service of a Utility exceed market
price by more than 10%, the ICC may order such rates reduced to no less than
110% of market price, even if the Utility's cost of service exceeds that level.
ALTERNATIVE RETAIL ELECTRIC SUPPLIERS
The Amendatory Act allows alternative retail electric suppliers ("ARES") to
provide electricity to customers eligible for delivery services, and other
services to customers, in the Utility's service area, thereby terminating the
Utility's historical status as the sole electric service provider. An ARES may
be an electric utility from another state, an affiliate of an out-of-state
utility, an affiliate of a Utility, a non-utility generator, or a power
marketer, broker, reseller or aggregator unaffiliated with any electric utility.
An ARES must obtain a certificate of service authority from the ICC based on
satisfaction of statutory criteria. The prices which an ARES charges to
customers for electricity and other services are not regulated by the ICC, but
various other aspects of the ARES' relationship with incumbent Utilities and
with customers, including certain marketing and billing practices, are
regulated. In addition, the Amendatory Act allows other Utilities to sell
electricity to customers eligible for delivery services, and to sell other
services to customers, in each other's service areas. For these purposes,
Utilities are not required to obtain certificates of service authority as are
ARES, but are subject to many of the same requirements as are ARES with respect
to marketing and billing practices and other aspects of their relationship with
customers.
COMPETITIVE SERVICES
The Amendatory Act allows a Utility to provide on a competitive basis
services that were formerly regulated, in three respects. First, with one
exception, a Utility and a customer in its service area may at any time enter
into a contract for the provision of services, at prices, terms and conditions
agreed to between the Utility and the customer. The exception is that a Utility
may not enter into such a contract to provide delivery services until such
services have been declared competitive by the ICC. Second, a Utility may
provide to customers in its service area, as a competitive service (and may
cease to offer as a tariffed service) a service which has been declared
competitive by the ICC through the procedure described under "--Transition
Period", and may self-declare a tariffed service (other than delivery services
or the provision of electric power and energy) to be competitive for new
customers only (subject to the authority of the ICC to revoke such declaration).
Third, the provision of electric power and energy by a Utility to customers in
the service area of another Utility is a competitive service.
In addition, the Amendatory Act classifies as competitive services those
services, other than tariffed services, which are related to, but not necessary
for, the provision of electric power and energy or delivery services. Under the
Amendatory Act, competitive services are not tariffed services, and are provided
at the
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rates, terms and conditions agreed to between the Utility and the customer. The
contracts or terms agreed to between the Utility and the customer do not have to
be filed with or approved by the ICC; and the ICC is precluded from altering the
rates, terms or conditions in such contracts.
As a result of the changes imposed on the Illinois retail electric markets
by the Amendatory Act, it is highly possible that by 2007, if not earlier, a
significant portion of electricity purchased by customers in Illinois Power's
service area, whether obtained from Illinois Power, another Utility or an ARES,
will be purchased on a competitive basis and not pursuant to a tariff. It is
also likely that by 2008, Illinois Power will still be the primary provider of
delivery services in its service area, even if its tariffed revenues from
provision of such services may have declined.
FEDERAL INITIATIVES; INCREASED COMPETITION
In addition to the changes which are occurring at the Illinois level
discussed throughout this section, federal legislative efforts may also
significantly alter the national market for electricity. See "Risk
Factors--Uncertainties Caused by Changing Regulatory and Legislative
Environment." The changes at both the federal and Illinois levels will have a
significant impact on Illinois Power as well as on other entities in the
industry. Illinois Power faces increased competition for resources and for
customers. Competitors include other electric utilities; privately-owned
independent power producers; exempt wholesale generators; power marketers,
brokers, resellers and aggregators; customers with their own sources of
generation and developers, equipment manufacturers, lenders and investment
bankers in the business of promoting such generation sources; suppliers of
natural gas and other fuels; electric cooperatives; and municipally-owned
utility systems.
DESCRIPTION OF THE INTANGIBLE TRANSITION PROPERTY
CREATION OF INTANGIBLE TRANSITION PROPERTY UNDER THE FUNDING LAW
The Funding Law provides the basis and authority for the creation of the
Intangible Transition Property and the issuance of the Notes issued hereunder.
Under the Funding Law, "intangible transition property" is defined as the right,
title and interest of a Utility, grantee, or assignee, arising pursuant to a
"transitional funding order", to impose and receive instrument funding charges
and all related revenues, collections, claims, payments, money or proceeds
thereof, including all right, title and interest of a Utility, grantee or
assignee in, to, under and pursuant to such transitional funding order. A
"grantee" is defined as any party, other than a Utility or an assignee which
acquires its interest from a Utility, to whom or for whose benefit the ICC
creates, establishes and grants rights in, to and under intangible transition
property. The Funding Law defines "instrument funding charge" as a nonbypassable
charge expressed in cents per kilowatt-hour authorized in a transitional funding
order to be applied and invoiced to each retail customer, class of retail
customers of a Utility or other person or group of persons obligated to pay any
base rates, transition charges or other rates for tariffed services from which
the instrument funding charges have been deducted and separately stated. Upon
the effectiveness of tariffs filed with the ICC to provide for the deduction and
separate statement and collection of instrument funding charges, instrument
funding charges become intangible transition property as specified in the
transitional funding order.
The Funding Law authorizes the ICC, pursuant to an application filed by a
Utility and in accordance with specific limitations and restrictions which are
described in this section, to issue a transitional funding order or orders
establishing, creating, and granting rights in and to a specific amount of
intangible transition property to or for the benefit of the Utility, a grantee,
or an assignee. The Funding Law also empowers the ICC, in the transitional
funding order, to authorize the sale, pledge, assignment or other transfer of
the Utility's, grantee's or assignee's rights in and to the intangible
transition property, the issuance of a specific dollar amount of grantee
instruments and/or transitional funding instruments by or on behalf of the
grantee, an assignee or an issuer; and the imposition and collection of a
specific dollar amount of instrument funding changes. The total amount of
intangible transition property which may be created by, and instrument funding
charges which may be imposed pursuant to, the related transitional
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funding order is projected to be sufficient to pay when due principal and
interest on the transitional funding instruments, and to provide for servicing
costs and related fees and expenses and the funding or maintenance of debt
service and other reserves as security to the holders of the transitional
funding instruments. The amount of transitional funding instruments which may be
authorized for issuance is subject to certain limitations and restrictions, and
the total amount of intangible transitional property which may be created may
not exceed specified limits, as described below. See "--Limitations on the
Amounts of Transitional Funding Instruments, Intangible Transition Property and
Instrument Funding Charges Which Can Be Authorized; Permitted Use of Proceeds."
The Funding Law provides that the creation, establishment and granting of
rights in, to and under intangible transition property in and to any grantee,
Utility, issuer or assignee shall include a grant of the power to levy general
tariffs on retail customers of a Utility or other persons required to pay
instrument funding charges in order to collect the instrument funding charges
relating to the intangible transition property in which such party has been
granted rights and in order to facilitate the issuance of transitional funding
instruments by or on behalf of the Utility, grantee, issuer or assignee. The
Funding Law empowers the ICC to authorize the Utility to contract with the
grantee, issuer, assignee or holders to collect the applicable instrument
funding charges for the benefit and account of the grantee, issuer, assignee or
holder, and provides that the Utility will, except as otherwise specified in the
related transitional funding order, account for and remit the applicable
instrument funding charges, without the obligation to remit any investment
earnings thereon, to or for the account of the grantee, issuer, assignee or
holder. The Funding Law further provides that the obligation of the Utility to
collect and remit the applicable instrument funding charges shall continue
irrespective of whether such Utility is providing electric power and/or other
services to the retail customers and other persons obligated to pay the
instrument funding charges. In addition, the Funding Law states that if the
documents creating the transitional funding instruments so provide, the
Utility's obligations, in the event of a default by the Utility in performing
them, shall be undertaken and performed by any other entity selected by the
assignee or any holder, group of holders or trustee or agent on behalf of such
holder or holders, (i) which provides electric power or services to a person who
was a retail customer of the Utility, and (ii) from whom such Utility is
entitled to recover transition charges under the Amendatory Act.
The Funding Law provides that the interest of a Utility, assignee, issuer or
grantee in intangible transition property may be assigned, sold or otherwise
transferred, in whole or in part, and may, in whole or in part, be pledged or
assigned as security to or for the benefit of a holder or holders. A "holder" is
defined in the Funding Law as any holder of a transitional funding instrument,
including a trustee, collateral agent, nominee or other such party acting for
the benefit of such a holder. The Funding Law specifies that neither intangible
transition property nor any right, title or interest therein shall constitute
property in which a security interest may be created under the UCC, that such
rights shall not be deemed proceeds of any property which is not intangible
transition property, and that the terms "account" and "general intangible" as
defined under Section 9-106 of the UCC and the term "instrument" as defined
under Section 9-105 of the UCC shall, as used in the UCC, be deemed to exclude
any intangible transition property or any right, title or interest therein. The
Funding Law provides that the granting, perfection and enforcement of security
interests in intangible transition property are governed by the provisions of
the Funding Law rather than by Article 9 of the UCC. The Funding Law further
provides that a sale, assignment or other transfer of intangible transition
property which is expressly stated in the documents governing the transaction to
be a sale or other absolute transfer, in a transaction approved in a
transitional funding order, shall be treated as an absolute transfer of all of
the transferor's right, title and interest in, to and under such intangible
transition property which places the transferred property beyond the reach of
the transferor or its creditors, as in a true sale, and not as a pledge or other
financing of such intangible transition property. The Funding Law states that
the characterization of any such transfer as an absolute transfer and the
corresponding characterization of the transferee's property interest shall not
be defeated or adversely affected by, among other things: (a) the commingling of
revenues arising with respect to
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intangible transition property with funds of the Utility or other funds of the
assignee, issuer or grantee; (b) granting to holders of transitional funding
instruments a preferred right to the intangible transition property, whether
direct or indirect; (c) the provision by the Utility, grantee, assignee or
issuer of any recourse, collateral or credit enhancement with respect to
transitional funding instruments; (d) the retention by the assigning party of a
partial interest in any intangible transition property, whether direct or
indirect, or whether subordinate or otherwise; or (e) the Utility's
responsibilities for collecting instrument funding charges and any retention of
bare legal title for the purpose of such collection activities. The Funding Law
further states that a sale, assignment or other transfer of intangible
transition property shall be deemed perfected as against third persons,
including any judicial lien creditors, when (a) the ICC has issued the
transitional funding order creating the intangible transition property, and (b)
a sale, assignment, or transfer of the intangible transition property has been
executed and delivered in writing. See "Security for the Notes--Security
Interest in Note Collateral."
LIMITATIONS ON THE AMOUNTS OF TRANSITIONAL FUNDING INSTRUMENTS, INTANGIBLE
TRANSITION PROPERTY AND INSTRUMENT FUNDING CHARGES WHICH CAN BE AUTHORIZED;
PERMITTED USE OF PROCEEDS
The Funding Law imposes several limitations and restrictions on the power of
the ICC to create intangible transition property and to authorize the issuance
of transitional funding instruments and the imposition and collection of
instrument funding charges.
Under the Funding Law, the ICC, in a transitional funding order, can only
create and establish intangible transition property in an amount (which is the
total dollar amount of instrument funding charges which may be applied and
invoiced over time) not to exceed the sum of: (a) the rate base established by
the ICC in the Utility's last rate case prior to December 16, 1997, plus (b) any
expenditures required to be undertaken by the Utility by the provisions of
Section 16-128 of the Act, including labor severance costs and employee
retraining costs, plus (c) amounts necessary to fund debt service and other
reserves, commercially reasonable costs and fees necessary in connection with
the marketing of the transitional funding instruments, plus (d) commercially
reasonable costs incurred from and after December 16, 1997 or to be incurred
which are associated with the issuance and collateralization of the transitional
funding instruments, plus (e) commercially reasonable costs incurred from and
after December 16, 1997 or to be incurred which are associated with the issuance
of the transitional funding instruments, including costs incurred on and after
such date, or to be incurred in connection with transactions to recapitalize,
refinance or retire stock and/or debt, any associated taxes and the costs
incurred to obtain, collateralize, issue, service and/or administer transitional
funding instruments, including interest and other related fees, costs and
charges, minus (f) the amount of any intangible transition property previously
created and established at the request of and for the benefit of the Utility in
a prior transitional funding order.
The Funding Law provides that transitional funding instruments may not be
issued prior to August 1, 1998, or after December 31, 2004. The aggregate dollar
amount of transitional funding instruments which may be authorized, in a
transitional funding order, for issuance, together with the amounts authorized
for issuance in any prior transitional funding order, may not exceed (a) between
August 1, 1998 and July 31, 1999, the Utility's total capitalization at December
31, 1996, times a percentage equal to 25% multiplied by the ratio of the
Utility's revenues from Illinois retail electric customers during the year ended
December 31, 1996 to its total retail electric revenues for such year; and (b)
subsequent to August 1, 1999, the Utility's total capitalization at December 31,
1996, times a percentage equal to 50% multiplied by the ratio of the Utility's
revenues from Illinois retail electric customers during the year ended December
31, 1996 to its total retail electric revenues for such year.
The Funding Law requires as a condition to issuance of any transitional
funding order that the final date on which the Utility, grantee or assignee
shall be entitled to charge and collect instrument funding charges related to
the intangible transition property shall be set to occur no later than December
31, 2008 (or December 31, 2010, if requested and approved by the ICC as being in
the public interest); provided, that the authority to impose and collect
instrument funding charges shall continue beyond such date until such time as
the related transitional funding instruments have been paid in full.
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Transitional funding instruments may only be authorized if the ICC finds, in
the related transitional funding order, that the Utility seeking the
transitional funding order will use the proceeds from the sale and issuance of
the transitional funding instruments for one or more of the following purposes:
(a) to refinance debt or equity, or both, in a manner which the Utility
reasonably demonstrates will result in an overall reduction in its cost of
capital, taking into account the costs of financing, and provided that any
proceeds transferred to a parent company through a common stock repurchase
transaction shall be used to retire publicly-traded common stock of the parent
company or to pay commercially reasonable transaction costs associated with such
retirement; (b) to fund debt service and other reserves, commercially reasonable
costs and fees necessary or desirable in connection with the marketing of the
transitional funding instruments; (c) to pay for commercially reasonable costs
associated with issuance and collateralization of the transitional funding
instruments; (d) to pay for the commercially reasonable costs associated with
the issuance of the transitional funding instruments, including the costs
incurred since December 16, 1997, or to be incurred, in connection with
transactions to recapitalize, refinance or retire stock and/or debt, any
associated taxes, and the costs incurred or to be incurred to obtain,
collateralize, issue, service and administer the transitional funding
instruments including interest and other related fees, costs and charges; and
(e) to repay or retire fuel contracts or obligations related to nuclear spent
fuel incurred by the Utility in providing electric power or energy services
prior to December 16, 1997 and to pay any expenditures required to be undertaken
by the Utility by the provisions of Section 16-28 of the Funding Law, including
labor severance costs and employee retraining costs. Moreover, the transitional
funding order must require the Utility to use at least 80% of the proceeds from
issuance of the transitional funding order for the purposes specified in (a) and
(e) above, and to use no more than 20% of the maximum amount of proceeds
permitted for purposes other than those specified in (a) above. The Funding Law
prohibits a Utility from using the proceeds from issuance of transitional
funding instruments for the purpose of refinancing debt or equity to such an
extent that as of the date of application of such proceeds, the common equity
component of the Utility's capital structure, exclusive of the portion that
consists of obligations representing transitional funding instruments, is
reduced below the lesser of (1) 40% or (2) the common equity percentage as of
December 31, 1996, adjusted to reflect any write-off of assets or common equity
implemented or required to be implemented as a result of the Amendatory Act. The
Funding Law also prohibits the Utility from using the proceeds from issuance of
transitional funding instruments to repay or retire obligations incurred by an
affiliate of the Utility, other than in connection with any refinancing of
transitional funding instruments issued by such affiliate, without consent of
the ICC. Finally, the Funding Law provides that any use of the proceeds from
issuance of transitional funding instruments, other than in accordance with the
purposes specified in the related transitional funding order, shall be void.
The Funding Law provides that the instrument funding charges imposed on a
customer or class of customers may not cause such customer's or class of
customers' rates for tariffed services, including delivery charges or transition
charges, to exceed the amounts which the customer otherwise would have paid; and
that the Utility may not, as the result of issuance of transitional funding
instruments, increase any of its rates for tariffed services, including delivery
charges, or its transition charges, above the levels which the Utility would
have been authorized to charge if the Utility were not authorized to impose and
collect instrument funding charges. See "Risk Factors--Reduction in Amount of
Revenue From Applicable Rates."
IMPOSITION AND COLLECTION OF INSTRUMENT FUNDING CHARGES; ADJUSTMENT MECHANISM
The Funding Law empowers the ICC, in a transitional funding order, to
authorize the imposition and collection of a specific amount of instrument
funding charges projected to be sufficient to pay when due the principal of and
interest on the corresponding transitional funding instruments, together with
premium, servicing fees and other fees, costs and charges related thereto, and
to maintain any required reserves.
The Funding Law provides that concurrently with the issuance of a
transitional funding order and with the sale, pledge, assignment or other
transfer of, or the establishment, creation, and granting of, a Utility's,
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assignee's or grantee's rights in and to intangible transition property and the
issuance of transitional funding instruments, the Utility shall begin to impose
and collect the specified instrument funding charges from retail customers,
classes of retail customers, and any other person or group of persons as set
forth in the transitional funding order. However, as a precondition to the
imposition of any instrument funding charges authorized in such transitional
funding order, the Utility shall file tariffs directing that the amount of the
instrument funding charges be deducted, stated, and collected separately from
the amounts otherwise billable by the Utility for base rates, transition charges
and other rates for tariffed services as set forth in the transitional funding
order. The total amount of instrument funding charges authorized by the
transitional funding order are to be allocated among the customer classes of the
Utility on the basis of the ratio of each class' base rate revenues for the year
ended December 31, 1996 to the Utility's total base rate revenues for that year,
and are then to be expressed in a cents per kilowatt-hour charge which is to be
deducted and stated separately from the base rates, transition charges and other
rates for tariffed services paid by the customers in each class. The Funding Law
specifies that upon the effectiveness of such tariffs, the amounts of instrument
funding charges thereby deducted and to be deducted shall become intangible
transition property as specified in the related transitional funding order. The
Funding Law expressly provides that the ICC has no authority to review the
tariffs filed by the Utility, except to confirm that the instrument funding
charges authorized in the transitional funding order have been deducted, stated,
and collected separately from base rates, transition charges and other rates for
tariffed services otherwise in effect at that time; and that the ICC may not
suspend such tariffs for any other reason.
The Funding Law requires the ICC to provide in any transitional funding
order for a procedure for periodic adjustments to the instrument funding charges
authorized in the transitional funding order in order to ensure the repayment in
accordance with projections set forth in such transitional funding order of all
transitional funding instruments authorized therein and to reconcile the
revenues received from instrument funding charges during the applicable
adjustment period with the revenues projected to be received from such charges
as set forth in the transitional funding order. Unless the transitional funding
order provides otherwise, the Funding Law requires such adjustments whenever the
instrument funding charges actually collected during an adjustment period are
greater or less that the instrument funding charges projected in the related
transitional funding order to be collected during that period. The Funding Law
states that the Utility is to determine, within 90 days (or such shorter period
as may be specified in the documents relating to the transitional funding
instruments) of the end of each adjustment period, whether any such adjustments
are required. If adjustments are required, they are to be implemented by the
Utility, grantee, issuer or assignee, as applicable, with written notice to the
ICC, within such 90-day (or shorter) period after the end of the adjustment
period. The Funding Law provides that any adjustment is to be calculated to
include amounts necessary for recovery of any additional costs incurred by the
grantee, Utility, assignee or issuer as a result of the delay in collections of
instrument funding charges. If, as a result of an adjustment, the amount of the
instrument funding charges per kilowatt-hour will exceed the amount per
kilowatt-hour initially authorized by the ICC in the related transitional
funding order, the Utility shall file amendatory tariffs with the ICC
correspondingly reducing, by the amount of such excess, the amounts otherwise
billable by the electric utility for base rates, transition charges and other
rates for tariffed services. The Funding Law provides that the ICC has no
authority to review any such amendatory tariffs except to confirm that the
instrument funding charges have been deducted, stated, and collected separately
from base rates, transition charges and other rates for tariffed services
otherwise in effect at that time; and that the ICC may not suspend such
amendatory tariffs for any other reason. The Funding Law further specifies that
the failure of such amendatory tariff to become effective for any reason shall
not delay or impair the effectiveness of the adjustments otherwise required as
described above.
THE TRANSITIONAL FUNDING ORDER ISSUED AT THE REQUEST OF ILLINOIS POWER
The Funding Law authorizes the ICC to issue one or more transitional funding
orders in favor of the Grantee at the request of Illinois Power (each, a
"Transitional Funding Order"), in order to create and establish the Intangible
Transition Property which may be financed through the issuance of transitional
funding instruments, such as the Notes. The ICC issued a Transitional Funding
Order (the "Initial TFO")
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on September 10, 1998. The Initial TFO permits the sale of Notes in an aggregate
principal amount not to exceed $864 million.
The Funding Law authorizes the ICC, in a transitional funding order, to
authorize imposition of instrument funding charges on retail customers, groups
of retail customers and certain other persons obligated to pay base rates,
transition charges and other rates for tariffed services from which such
instrument funding charges have been deducted and separately stated. The ICC is
further authorized to specify the manner in which the instrument funding charges
shall be collected, and to authorize the levying of general tariffs on retail
customers of a Utility for the collection of instrument funding charges.
Pursuant to this authority, each Transitional Funding Order will authorize and
require Illinois Power, as Servicer, to impose and collect IFC Charges on any
retail customer, class of retail customers or other person or group of persons
obligated to pay any Applicable Rates, from which IFC Charges have been
deducted. Each Transitional Funding Order will create and establish, among other
things, the related Intangible Transition Property and authorize the imposition
and collection of the related IFC Charges, which constitute separate
nonbypassable usage-based charges expressed in cents per kilowatt-hour payable
by Customers in an aggregate amount calculated to be sufficient to make the
Specified Payments. The Funding Law provides that the right to collect payments
based on the IFC Charges is a property right which may be pledged, assigned or
sold.
Customers who enter into private contracts with a Utility may no longer be
paying rates for tariffed services from which instrument funding charges are to
be deducted and therefore may not be subject to imposition of such charges under
the Funding Law. To address this situation, each Transitional Funding Order will
provide that neither Illinois Power nor any successor Utility may enter into any
contracts with any Customer obligated (or who would, but for such contract, be
obligated) to pay IFC Charges if, as a result thereof, such Customer would not
receive tariffed services (I.E., services subject to Applicable Rates), unless
the contract provides that the Customer will pay an amount each billing period
to the Grantee or its assigns (I.E., the Trust), or to Illinois Power as
Servicer, as applicable, equal to the amount of IFC Charges that would have been
billed if the services provided under such contract were tariffed services. Each
Transitional Funding Order will further provide that any revenues received by
Illinois Power or a successor Utility from such contracts shall, to the extent
IFC Charges would be imposed on the Customer if the services provided pursuant
to such contract were subject to Applicable Rates, be deemed to be proceeds of,
and included in, the Intangible Transition Property created by the related
Transitional Funding Order. However, Customers do not include retail customers
of Illinois Power not paying Applicable Rates as a result of entering into a
contract with Illinois Power before the Series Issue Date, unless the customer
has agreed in such contract to pay to the Grantee or its assigns an amount equal
to the amount of IFC Charges that would have been billed if the services
provided under such contract were subject to Applicable Rates. Between the
effective date of the Amendatory Act and on or about October 10, 1998, Illinois
Power entered into a number of private contracts with customers each of which
generally provides that the applicable customer will pay to Illinois Power, as
Servicer, amounts for instrument funding charges calculated in accordance with a
transitional funding order issued by the ICC, and that Illinois Power will
deduct and state separately such amounts from the amounts otherwise payable
under these contracts; however, these contracts do not expressly provide that
the Grantee or its assigns (I.E., the Trust) shall be a third-party beneficiary
of such contract. The aggregate expected total annual revenues from such
contracts currently total an amount equal to approximately 0.93% of Illinois
Power's total operating revenues from sales to retail customers for the fiscal
year ended December 31, 1997.
Each Transitional Funding Order will entitle the Trust, as the assignee of
the Intangible Transition Property from the Grantee, to receive the payments
made pursuant to the IFC Charges from all Customers through December 31, 2008
or, if later, until the Trust has received IFC Collections sufficient to retire
all outstanding Series of Notes and cover related fees and expenses. Such
payments from the Customers are referred to herein as the "IFC Payments." The
Funding Law requires Illinois Power to submit a statement of the final terms of
any Series of Notes to the ICC within 90 days of the receipt of proceeds from
such issuance, and authorizes the ICC to require Illinois Power to file periodic
reports on its use of proceeds at
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intervals of not less than one year. Each Transitional Funding Order will permit
the Servicer to calculate and implement adjustments of the IFC Charges from time
to time, in order to enhance the likelihood of retirement of each Series and
Class of Notes on a timely basis. See "--Adjustments to IFC Charges."
The IFC Charges authorized in any Transitional Funding Order (which may be
increased by the ICC in connection with the issuance of any subsequent
Transitional Funding Order) will be set forth in the related Prospectus
Supplement. In connection with the issuance and pricing of any Series of Notes,
Illinois Power will file revisions to its IFC Tariff with the ICC to provide
for, among other things, revisions to the IFC Charges authorized in the related
Transitional Funding Order, based on the final terms of such Series, which will
also be set forth in the related Prospectus Supplement. Each Transitional
Funding Order will provide that as each Series of Notes is issued, Illinois
Power shall file revisions to its IFC Tariff deducting and separately stating
from other rates for tariffed services the sum of the cents per kilowatt-hour
charges relating to that Series (plus, in connection with any subsequent
Transitional Funding Order increasing the IFC Charges, the cents per
kilowatt-hour charges relating to previously-issued Series), which shall be
calculated using projected kilowatt-hour sales and deliveries for the succeeding
calendar year, from Illinois Power's Applicable Rates.
"Applicable Rates" means any tariffed charges owed to Illinois Power,
including, without limitation, charges for "base rates", "delivery services" or
"transition charges" (including lump-sum payments of such charges) as each such
term is defined in the Act. Applicable Rates do not include late charges or
charges set forth in those tariffs specifically and primarily to collect amounts
related to decommissioning expense, taxes, municipal infrastructure maintenance
fees, franchise fees or other franchise cost additions, costs imposed by local
governmental units which are allocated and charged to customers within the
boundaries of such governmental units' jurisdictions, renewable energy resources
and coal technology development assistance charges, energy assistance charges
for the Supplemental Low-Income Energy Assistance Fund, reimbursement for the
costs of optional or non-standard facilities and reimbursement for the costs of
optional or non-standard meters, or monies that will be paid to third parties
(after deduction of allowable administrative, servicing or similar fees)
(collectively, "Excluded Amounts"). Payments owed to the Grantee or the Trust in
respect of IFC Charges do not constitute Excluded Amounts. To the extent any
Applicable Rates reflect compensation owed by Illinois Power for power or energy
supplied to customers by a person or entity other than Illinois Power, the IFC
Charges will be deducted and stated separately from such Applicable Rates
without giving effect to such compensation. Administrative, servicing and
similar fees referred to in the parenthetical above means fees which Illinois
Power is expressly authorized under its current agreements with third parties by
statute, tariff or otherwise to deduct from monies owed to such parties to cover
its cost of processing such third-party payments. Charges associated with
Excluded Amounts are generally the subject of separate riders to Illinois
Power's rates, such that increases in such charges are collected through an
increase in the amount permitted to be collected under such rider, rather than
through an increased share of the Applicable Rates. As a result, any increase in
Excluded Amounts should not result in a material decrease in the amount of
Applicable Rates available to cover the amount of IFC Charges.
TRANSACTIONS PURSUANT TO THE TRANSITIONAL FUNDING ORDER
Pursuant to the authority granted by the Transitional Funding Order, the
Grantee will assign its rights in the Intangible Transition Property to the
Trust. The Trust will thereafter, at the times and in the amounts permitted by
the Funding Law and authorized by each Transitional Funding Order, issue the
Notes, which shall be secured by the Intangible Transition Property and the
other Note Collateral, to the public. The Trust will remit the proceeds from the
issuance of the Notes, less the expenses of issuance and such amounts of the
proceeds necessary to fund the Capital Subaccount, to the Grantee as
consideration for the assignment to the Trust, less $100,000 in the aggregate
for all Series of Notes, of the Grantee's rights in the Intangible Transition
Property. The Grantee will distribute the amount of the proceeds received from
the Trust to the Grantee's sole member, Illinois Power, in consideration for
Illinois Power's actions requesting that the Intangible Transition Property be
created and vested in the Grantee.
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The Grantee will also enter into the Servicing Agreement with Illinois Power
as Servicer, pursuant to which the Servicer, in connection with and upon the
issuance of each series of Notes, will impose IFC Charges on Customers and will
thereafter collect and remit the IFC Charges to the Trust, as assignee of the
Grantee's ownership interest in the Intangible Transition Property. See
"Servicing." The Servicing Agreement provides that the Servicer will file
revisions to the IFC Tariff with the ICC in connection with each Series of Notes
providing for the deduction of the related IFC Charges.
NONBYPASSABLE IFC CHARGES
Each Transitional Funding Order will provide that the IFC Charges are
nonbypassable, meaning that Customers will still be required to make payments
with respect to the applicable IFC Charges even if a Customer elects to purchase
electricity from another supplier or another entity takes over a portion of
Illinois Power's existing service; PROVIDED, HOWEVER, that the IFC Charges must
be deducted from Applicable Rates which could otherwise be charged by Illinois
Power to such Customers. If a Customer ceases to take any tariffed services from
Illinois Power or any successor Utility within Illinois Power's service area,
for example, by generating its own electricity or by moving outside of Illinois
Power's service area, then such Customer will not owe any IFC Charges, except
that if such Customer takes electric power or energy from an ARES or another
Utility, then such Customer may be obligated under the Act to pay transition
charges from which the IFC Charges would continue to be deducted and stated
separately. See "Electric Industry Restructuring in Illinois--Transition
Charges."
ADJUSTMENTS TO IFC CHARGES
The Servicing Agreement and each Transitional Funding Order will require the
Servicer to calculate and implement adjustments to the IFC Charges which are
designed to enhance the likelihood that the IFC Collections which are remitted
to the Collection Account will be sufficient to make the Specified Payments.
Each Transitional Funding Order also requires the Servicer to calculate the
"Debt Service Requirement" and the "Debt Service Billing Requirement" for each
Applicable Period. The "Debt Service Requirement" for any period means the total
dollar amount of IFC Payments which the Servicer calculates to be needed to be
collected in such period to make the Specified Payments. The "Debt Service
Billing Requirement" for any period means the total dollar amount of IFC
Charges, taking into account write-offs and delays in collections, which the
Servicer calculates will need to be billed during such period in order to
generate IFC Collections in the full amount of the Debt Service Requirement for
such period. The calculation of the Debt Service Requirement and the Debt
Service Billing Requirement and the revised IFC Charges take into account, to
the extent available, among other things, (a) a comparison of the IFC Charges
calculated during the preceding Reconciliation Period and the amount projected
to be collected, and the resulting overcollection or shortfall, and any interest
costs resulting from any such shortfall, (b) updated assumptions by the Servicer
as to projected future usage of electricity by Customers, (c) future fees and
expenses relating to the Intangible Transition Property and the Notes, (d)
amounts available in the General Subaccount and Reserve Subaccount, (e) amounts
necessary to fund and replenish the Overcollateralization Subaccount and Capital
Subaccount to required levels, (f) amounts payable on the Notes, and (g)
expected delinquencies and write-offs, including amounts necessary for recovery
of any additional costs incurred by the Trust as a result of the relevant delay
in collections of IFC Charges, all assuming that there will be no net earnings
on any amounts in the Collection Account. The Debt Service Requirement and the
Debt Service Billing Requirement will be calculated by the Servicer within the
month following the end of each Reconciliation Period and will be calculated for
the next Applicable Period commencing on the succeeding Adjustment Date, as
described below.
The resulting revised Debt Service Billing Requirement for the succeeding
Applicable Period will be allocated among the IFC Customer Classes of the
Servicer subject to IFC Charges on the basis of their 1996 base rate revenues,
as set forth in "The Servicer--Illinois Power Customer Base, Electric Energy
Consumption and Base Rates." The amount so allocated to each class will be
divided by the number of
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kilowatt-hours projected to be sold and delivered to customers in the class by
the Servicer in the succeeding Applicable Period to determine the IFC Charges to
be billed during such Applicable Period. If, in connection with the foregoing
allocations, the forecasted revenues from Applicable Rates for any IFC Customer
Class during an Applicable Period is projected to be less than the IFC Charges
allocated to that class for the same period, the deficiency shall be ratably
allocated among the remaining IFC Customer Classes based on their percentages of
the 1996 base rate revenues, recalculated to exclude such IFC Customer Class.
The Servicer will file corresponding revisions, if any, to the IFC Tariff
with the ICC by the third business day preceding the first day of the second
calendar month following the end of the Reconciliation Period, to be effective
on the first day of such second calendar month (the "Adjustment Date"). The IFC
Tariff will provide for the revised IFC Charges to be deducted and separately
stated from the Servicer's base rates, transition charges and other rates for
tariffed services, and for corresponding reductions in such base rates,
transition charges and other rates for tariffed services; however, the IFC
Tariff will not result in any increases in the amounts of any of such base
rates, transition charges and other rates for tariffed services.
All Adjustments shall be implemented pursuant to the IFC Tariff filed by
Illinois Power in connection with the related Transitional Funding Order. As
required by the Funding Law, if, as a result of any Adjustment, the IFC Charge,
as so adjusted, will exceed the amount per kilowatt-hour of the IFC Charge
initially authorized by the ICC in such Transitional Funding Order, then
Illinois Power shall be obligated to file Amendatory Tariffs adjusting the
amounts otherwise billable by Illinois Power for Applicable Rates, to offset the
amount of such excess (or, if Illinois Power shall have previously filed any
such Amendatory Tariffs, the incremental amount of such excess). However, the
failure of such Amendatory Tariff to become effective for any reason shall not
delay or impair the effectiveness of any such Adjustments.
The Servicing Agreement will require the Servicer to deliver promptly a
written copy of all filings made with the ICC in connection with any Adjustment,
together with a copy of all material supporting documents, to the Trust and the
Indenture Trustee.
SALE AND ASSIGNMENT OF INTANGIBLE TRANSITION PROPERTY
On the initial Series Issuance Date, in accordance with the requirements of
the Funding Law and the terms of the Initial TFO and pursuant to the initial
Sale Agreement, the Grantee will sell, transfer and assign to the Trust, without
recourse, its entire right in, to and under the Intangible Transition Property
that is created by the Initial TFO (the "Initial Intangible Transition
Property") and in, to and under the related Basic Documents (such sale, transfer
and assignment to include all revenues, collections, claims, rights, payments,
money or proceeds, including, without limitation, any revenues derived from
lump-sum payments of transition charges, condemnation proceedings or FERC
stranded cost recoveries which are allocable to the IFC Charges under the
Servicing Agreement). The net proceeds received by the Trust from the sale of
the Notes, less the amount retained by the Trust to fund the Capital Subaccount,
will be applied to the purchase of the Initial Intangible Transition Property
and related assets. Thereafter, the Grantee may agree with the Trust to sell
additional Intangible Transition Property ("Subsequent Intangible Transition
Property") to the Trust, subject to the satisfaction of certain conditions,
including the establishment and creation of such Subsequent Intangible
Transition Property (and the vesting thereof in the Grantee) pursuant to a
subsequent Transitional Funding Order. Such Subsequent Intangible Transition
Property will be sold to the Trust effective on a date (a "Subsequent Transfer
Date") specified in a subsequent Sale Agreement between the Grantee and the
Trust. The Trust will issue and sell additional Notes in connection therewith.
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The Grantee's entire right in, to and under the Initial Intangible
Transition Property was granted to the Grantee by the ICC in accordance with the
Initial TFO. The Grantee's rights in, to and under any Subsequent Intangible
Transition Property will, subject to the satisfaction of certain conditions, be
granted to the Grantee by the ICC in accordance with a subsequent Transitional
Funding Order related thereto.
The Trust will appoint the Servicer as custodian of the documentation
relating to the Intangible Transition Property. Illinois Power's data systems
will reflect the sale and assignment of the Intangible Transition Property from
the Grantee to the Trust. Illinois Power's financial statements will indicate
that the Intangible Transition Property has been sold by the Grantee to the
Trust and will not be available to creditors of Illinois Power, although, unless
otherwise specified in the related Prospectus Supplement, for financial
reporting and Federal income tax purposes Illinois Power intends to treat the
Notes as representing debt of Illinois Power.
Subsequent Intangible Transition Property may be sold by the Grantee to the
Trust from time to time, solely in connection with the issuance and sale of
additional Notes by the Trust. Any such conveyance of Subsequent Intangible
Transition Property is subject to the following conditions, among others:
(a) the Grantee shall have entered into a written sale agreement with
the Trust;
(b) Illinois Power shall have received a subsequent Transitional Funding
Order issued by the ICC relating to such Subsequent Intangible Transition
Property;
(c) as of the applicable Subsequent Transfer Date, the Grantee shall not
be insolvent and shall not be made insolvent by such conveyance;
(d) the Rating Agency Condition shall have been satisfied with respect
to such conveyance;
(e) Illinois Power shall have delivered to the Grantee, the Trust, the
Delaware Trustee and the Indenture Trustee an opinion of independent tax
counsel and/or a ruling from the IRS (as selected by, and in form and
substance reasonably satisfactory to, Illinois Power) to the effect that,
for federal income tax purposes, (i) the ICC's issuance of the Transitional
Funding Order creating and establishing the Subsequent Intangible Transition
Property in the Grantee, and the assignment pursuant to such conveyance of
such Subsequent Intangible Transition Property will not result in gross
income to the Grantee, the Trust or Illinois Power, and the future revenues
relating to the Subsequent Intangible Transition Property and the assessment
of the IFC Charges (except for revenue related to certain lump-sum payments)
will be included in Illinois Power's gross income in the year in which the
related electrical service is provided to consumers, and (ii) such
conveyance will not adversely affect the characterization of the then
outstanding Notes as obligations of Illinois Power;
(f) as of the applicable Subsequent Transfer Date, no breach by the
Grantee of its representations, warranties or covenants in the applicable
Sale Agreement and no Servicer Default shall exist;
(g) as of the applicable Subsequent Transfer Date, the Trust shall have
sufficient funds available to pay the purchase price for the Subsequent
Intangible Transition Property to be transferred on such date and all
conditions to the issuance of new series of Notes shall have been satisfied;
and
(h) the Grantee and the Trust shall have taken any action required to
perfect the ownership interest or security interest (as the case may be) of
the Trust in the Subsequent Intangible Transition Property and the proceeds
thereof, free and clear of any liens.
GRANT AGREEMENT
Under each Grant Agreement, the Grantee will agree, in consideration of
Illinois Power filing an application with the ICC requesting a Transitional
Funding Order creating and vesting in the Grantee the related Intangible
Transition Property, to remit to Illinois Power the net proceeds remitted to it
by the Trust from the sale of the Notes. To the extent that, notwithstanding the
Funding Law and the related
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Transitional Funding Order, applicable law provides that Illinois Power has any
interest in the Intangible Transition Property or any part thereof, Illinois
Power will agree to sell, transfer, assign, set over and otherwise convey to the
Grantee without recourse all of Illinois Power's right, title and interest, if
any, in, to and under the Intangible Transition Property (such sale, transfer
and assignment to include all revenues, collections, claims, rights, payments,
money or proceeds, including, without limitation, any revenues derived from
lump-sum payments of transition charges, condemnation proceedings or FERC
stranded cost recoveries which are allocable to the IFC Charges under the
Servicing Agreement). Such sale, transfer, assignment, set over and conveyance
by Illinois Power contemplated under each Grant Agreement will be expressly
stated to be an absolute transfer pursuant to Section 18-108 of the Funding Law.
In each Grant Agreement, Illinois Power will also acknowledge and consent to
any transfer, pledge, assignment or grant of a security interest by the Grantee
to the Trust pursuant to the related Sale Agreement, and by the Trust to the
Indenture Trustee for the benefit of the Noteholders pursuant to the Indenture,
of all right, title and interest of the Grantee in, to and under the Intangible
Transition Property and the proceeds thereof, and the assignment of any or all
of the Grantee's rights and obligations under such Grant Agreement to the Trust
and the Indenture Trustee.
REPRESENTATIONS AND WARRANTIES OF ILLINOIS POWER. In each Grant Agreement,
Illinois Power will make representations and warranties to the Grantee to the
effect, among other things, that:
(a) the information provided by Illinois Power to the Grantee with
respect to the applicable Intangible Transition Property is correct in all
material respects;
(b) immediately prior to the transactions contemplated by the Grant
Agreement, Illinois Power's right, title and interest in and to all of its
rights to payments under Applicable Rates is free and clear of all
encumbrances, and is not subject to any defenses or counterclaims nor have
any such encumbrances, defenses or counterclaims been asserted with respect
thereto;
(c) the applicable Intangible Transition Property has been validly
granted to and vested in the Grantee, and the Grantee owns all right, title
and interest to such Intangible Transition Property free and clear of all
liens and rights of any other person (other than liens created pursuant to
the related Sale Agreement and the Indenture), and all filings to be made by
Illinois Power (including filings with the ICC under the Funding Law)
necessary in any jurisdiction to give the Grantee a first priority perfected
ownership interest in such Intangible Transition Property will have been
made and no further action is required under Illinois law to maintain such
ownership interest in such Intangible Transition Property;
(d) (i) Illinois Power was authorized to apply for each Transitional
Funding Order;
(ii) Illinois Power filed each such application in proper form with
the ICC;
(iii) each Transitional Funding Order pursuant to which any
Intangible Transition Property has been created and each related IFC
Tariff has established, created and granted rights in and to the related
Intangible Transition Property and is valid, binding and irrevocable and
such Intangible Transition Property (including the right to impose and
collect the related IFC Charges) constitutes a current and original
property right vested in the Grantee;
(iv) each Transitional Funding Order pursuant to which any
Intangible Transition Property has been created has been duly entered by
the ICC, is final and non-appealable and is in full force and effect;
(v) no Transitional Funding Order nor any Intangible Transition
Property created and established thereby nor the related IFC Charges
shall be subject to reduction, postponement, impairment or termination by
any subsequent action of the ICC;
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(vi) the State of Illinois may not limit, alter, impair or reduce
the value of the Intangible Transition Property in a manner substantially
impairing the Indenture or the rights and remedies of the Noteholders
(and, consequently, may not revoke, reduce, postpone or terminate the
related Transitional Funding Order or the rights of the Noteholders to
receive IFC Payments and all other proceeds of the Intangible Transition
Property), until the Notes, together with interest thereon, are fully
paid and discharged (except to the extent of a temporary impairment that
the State of Illinois is able to demonstrate is necessary to advance a
significant and legitimate public purpose);
(vii) the process by which the related Transitional Funding Order was
adopted and approved and the related IFC Tariff was filed, and such
Transitional Funding Order and IFC Tariff themselves, comply with all
applicable laws, rules and regulations; and
(viii) no other approval or filing with any other governmental body is
required in connection with the grant of the related Intangible
Transition Property, except those that have been obtained or made;
(e) the assumptions used in calculating the related IFC Charges are
reasonable and made in good faith;
(f) upon the effectiveness of the applicable IFC Tariff:
(i) all of the related Intangible Transition Property constitutes a
current property right vested in the Grantee;
(ii) the related Intangible Transition Property includes, without
limitation, (A) the right, title and interest in the related IFC Charges
authorized under the related Transitional Funding Order, as adjusted from
time to time, (B) the right, title and interest in all revenues,
collections, claims, payments, money or proceeds of or arising from the
related IFC Charges set forth in such IFC Tariff and (C) all rights to
obtain adjustments to the related IFC Charges pursuant to the related
Transitional Funding Order; and
(iii) the Grantee is entitled to impose and collect the related IFC
Charges in an aggregate amount equal to the principal amount of the
Notes, all interest on the Notes, all amounts required to be deposited in
the Reserve Subaccount, the Overcollateralization Subaccount and (to the
extent payable from the proceeds of the related IFC Charges) the Capital
Subaccount, and all related fees, costs and expenses in respect of the
Notes until they have been paid in full subject only to the limitation
set forth in the Transitional Funding Orders as the aggregate maximum
dollar amount of Intangible Transition Property;
(g) Illinois Power is a corporation duly organized, validly existing and
in good standing under the laws of the State of Illinois, with power and
authority to own its properties and conduct its business as currently owned
or conducted and to execute, deliver and perform the terms of such Grant
Agreement and has (and has had at all relevant times) the requisite power,
authority and legal right to request that the ICC issue the related
Transitional Funding Order;
(h) the execution, delivery and performance of such Grant Agreement have
been duly authorized by Illinois Power by all necessary corporate action;
(i) such Grant Agreement constitutes a legal, valid and binding
obligation of Illinois Power, enforceable against Illinois Power in
accordance with its terms, subject to customary exceptions relating to
bankruptcy and equitable principles;
(j) the consummation of the transactions contemplated by such Grant
Agreement does not conflict with, or result in a default under, Illinois
Power's Articles of Incorporation, bylaws or any agreement to which Illinois
Power is a party or bound, result in the creation or imposition of any lien
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upon Illinois Power's properties pursuant to any agreement or violate any
law or any order, rule or regulation applicable to Illinois Power;
(k) no governmental approvals, authorizations or filings are required
for Illinois Power to execute, deliver and perform its obligations under
such Grant Agreement except those which have been previously obtained or
made (it being understood that Illinois Power nonetheless has ongoing legal
obligations to make future filings with the ICC relating to Illinois Power's
use of proceeds from and the final terms of the transactions contemplated by
such Grant Agreement); and
(l) except as disclosed in the Grant Agreement, no court or
administrative proceeding or investigation is pending or, to Illinois
Power's knowledge, threatened (i) asserting the invalidity of the Funding
Law, such Grant Agreement, any of the other related Basic Documents or the
related Notes, (ii) seeking to prevent the grant of the related Intangible
Transition Property to the Grantee or the consummation of any of the
transactions contemplated by such Grant Agreement or any of the other
related Basic Documents, (iii) seeking any determination or ruling that
could reasonably be expected to materially and adversely affect the
performance by Illinois Power of its obligations under, or the validity or
enforceability of, such Grant Agreement, any of the other related Basic
Documents or the related Notes, or (iv) which could reasonably be expected
to adversely affect the federal or state income tax attributes of the
related Notes.
COVENANTS OF ILLINOIS POWER. In each Grant Agreement, Illinois Power will
covenant, among other things, that:
(a) so long as any of the Notes are outstanding, it will keep in full
force and effect its existence, rights and franchises as a corporation under
the laws of its jurisdiction of incorporation and its qualification to do
business to the extent necessary to protect the validity of the Basic
Documents;
(b) it will not sell, pledge, assign or transfer to any other person, or
grant, create, incur, assume, suffer to exist or otherwise assert any lien
on or seek to limit, alter, impair, reduce or terminate any of the related
Intangible Transition Property or any interest therein;
(c) it shall defend the right, title and interest of the Grantee or the
Trust in, to and under the related Intangible Transition Property against
all claims of third parties claiming through or under Illinois Power;
(d) it will pay to the Servicer all payments received by it in respect
of the IFC Charges or the proceeds thereof no later than two Business Days
after such receipt by Illinois Power;
(e) it shall notify the Grantee, the Trust and the Indenture Trustee
promptly after becoming aware of any lien on any of the related Intangible
Transition Property other than the conveyances under the Grant Agreement,
the Sale Agreement and the Indenture;
(f) it shall comply with its organizational documents and all applicable
laws to the extent that failure to so comply would materially adversely
affect the Trust's or the Indenture Trustee's interests in the Intangible
Transition Property;
(g) it shall indicate in its financial statements that it is not the
owner of the Intangible Transition Property and it shall not own or purchase
any Notes;
(h) upon the creation and grant of the Intangible Transition Property
and, for so long as the Notes are outstanding, except with respect to taxes,
it will not make any statement or reference in respect of the Intangible
Transition Property that is inconsistent with the ownership interest of the
Grantee;
(i) it shall execute and file such filings, and cause to be executed and
filed such filings as may be required by law to fully preserve, maintain,
and protect the interests of the Grantee or the Trust in the
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Intangible Transition Property, including all filings required under the
Funding Law relating to the grant of the related Intangible Transition
Property to the Grantee;
(j) it shall institute any action or proceeding necessary to compel
performance by the ICC or the State of Illinois of any of their obligations
or duties under the Funding Law, the related Transitional Funding Order and
related Tariff, and will take such legal or administrative actions as may be
reasonably necessary to protect the Grantee or the Trust from claims, state
actions or other actions or proceedings of third parties which, if
successfully pursued, would result in a breach of any representation set
forth in such Grant Agreement;
(k) it shall not, prior to the date which is one year and one day after
the termination of the Indenture, acquire, petition or otherwise invoke or
cause any other Person to invoke the process of any court or government
authority for the purpose of commencing or sustaining a case against, or
appointment of a receiver for, the Grantee or the Trust under any federal or
state bankruptcy, insolvency or similar law; and
(l) it shall pay all material taxes, assessments and governmental
charges imposed upon it or any of its properties or assets if the failure to
pay any such taxes, assessments and governmental charges would, after any
applicable grace periods, result in a lien on the Intangible Transition
Property;
(m) neither Illinois Power nor any successor will cause or permit the
Grantee or the Trust to elect to be classified as an association taxable as
a corporation for federal income tax purposes;
(n) neither Illinois Power nor any successor thereto will enter into any
contract with any Customer obligated (or who would, but for such contract,
be obligated) to pay IFC Charges if, as a result thereof, such Customer
would not receive tariffed services, unless the contract provides that the
Customer will pay an amount to the Grantee or its assigns, or to Illinois
Power as Servicer, as applicable, equal to the amount such Customer would
pay in IFC Charges;
(o) it will not, except as required by applicable law, initiate any
material changes to its policies and procedures which are likely to
materially and adversely affect its timely recovery of amounts billed to
Customers;
(p) if Illinois Power determines that the aggregate dollar amount of IFC
Charges to be imposed and collected is reasonably likely to exceed the
maximum dollar amount of Intangible Transition Property authorized by the
Transitional Funding Orders and any Notes remain outstanding, Illinois Power
shall make a good faith effort to take any and all subsequent regulatory
action with the ICC reasonably necessary to obtain an order permitting the
creation of additional Intangible Transition Property in an amount
sufficient to pay such Notes in full; and
(q) Illinois Power will take any and all actions reasonably necessary to
preserve the Noteholders' rights with respect to payments on the Notes out
of amounts represented by the IFC Charges or their equivalent, including,
but not limited to, (i) making appropriate filings with the State of
Illinois, the ICC or other regulatory bodies to defend, preserve and create
on behalf of Noteholders the right to receive payments as provided in the
Notes, (ii) defending against or instituting and pursuing legal actions and
appearing or testifying in hearings or similar proceedings, as may be
necessary to block or overturn any attempts to cause a repeal, modification
of, supplement to or judicial invalidation of, the Amendatory Act or the
Transitional Funding Order or the rights of holders of Intangible Transition
Property by legislative enactment or otherwise that would be adverse to the
Grantee, the Trust or any Noteholders, and (iii) unless otherwise prohibited
by applicable law or judicial or regulatory order in effect at such time,
continuing to deduct and pay over to the Servicer for the benefit of the
Trust all IFC Payments or equivalent revenues received by Illinois Power
notwithstanding any declaration of invalidity of the Amendatory Act, the
Funding Law and/or the Funding Order. Under current law, no assurance can be
given that Illinois Power is authorized to act in accordance with clause
(iii) if the applicable Transitional Funding Order is no longer in effect.
However, Illinois Power has agreed to
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indemnify the Noteholders for certain losses which may result if Illinois
Power is unable to continue to impose or collect IFC Charges or equivalent
amounts.
AMENDMENT OF GRANT AGREEMENTS. Each Grant Agreement may be amended from
time to time by Illinois Power and the Grantee, with prior written notice given
to the Rating Agencies and the prior written consent of the Trust, but without
the consent of any of the Noteholders, to cure any ambiguity, to correct or
supplement any provisions in such Grant Agreement or for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
in such Grant Agreement or of modifying in any manner the rights of the
Noteholders; PROVIDED, HOWEVER, that such action shall not, as evidenced by an
officer's certificate delivered to the Trust, adversely affect in any material
respect the interests of any Noteholder.
Each Grant Agreement may also be amended from time to time by Illinois Power
and the Grantee, with prior written notice given to the Rating Agencies and the
prior written consent of the Trust, the Indenture Trustee and Noteholders
holding not less than a majority in principal amount of the then outstanding
Notes of all Series affected thereby, for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of such Grant
Agreement or of modifying in any manner the rights of the Noteholders; PROVIDED,
HOWEVER, that no such amendment shall (a) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, IFC Collections relating to the
IFC Charges, or (b) reduce the percentage of the outstanding principal amount of
the Notes, the Noteholders of which are required to consent to any such
amendment, without the consent of the Noteholders of all the outstanding Notes.
INDEMNIFICATION OBLIGATIONS OF ILLINOIS POWER. Each Grant Agreement will
provide that Illinois Power will indemnify the Grantee, the Trust, the Indenture
Trustee, the Delaware Trustee and the Noteholders, and each of their respective
officers, directors, employees and agents for, and defend and hold harmless each
such person from and against, (a) any and all taxes (other than any taxes
imposed on the Noteholders) that may at any time be imposed on or asserted
against any such person as a result of the grant of the Intangible Transition
Property to the Grantee, or that may be imposed on or asserted against any such
person under existing law as of the Series Issuance Date as a result of the
Grantee's ownership and assignment of the Intangible Transition Property, the
Trust's issuance and sale of the Notes, or the other transactions contemplated
herein, including, in each case, any sales, gross receipt, general corporation,
tangible personal property, privilege or license taxes (but excluding any taxes
imposed as a result of a failure of such person to properly withhold or remit
taxes imposed with respect to payments on any Note); and (b) any and all amounts
of principal and interest on the Notes not paid when due in accordance with
their terms and the amount of any deposits to the Trust required to have been
made in accordance with the terms of the Basic Documents which are not made when
so required and any and all liabilities, obligations, claims, actions, suits or
payments of any kind whatsoever that may be imposed on or asserted against any
such person, together with any reasonable costs and expenses incurred by such
person, as a result of Illinois Power's breach of any of its representations,
warranties or covenants contained in such Grant Agreement. Such indemnification
obligations will rank PARI PASSU with other general unsecured obligations of
Illinois Power. The indemnities described above will survive the termination of
such Grant Agreement and include reasonable fees and expenses of investigation
and litigation (including reasonable attorneys' fees and expenses).
Illinois Power will also deliver to the Indenture Trustee a remediation
agreement confirming certain of the representations, warranties and covenants of
Illinois Power contained in the Grant Agreement, and its agreement to continue
to deduct and pay IFC Charges or equivalent revenues in the event the Grant
Agreement is declared invalid. Under current law, no assurance can be given that
Illinois Power is authorized to continue to deduct and pay IFC Charges or
equivalent revenues under such agreement if the applicable Transitional Funding
Order is no longer in effect.
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SALE AGREEMENT
Under each Sale Agreement, the Grantee will agree, in consideration of the
Trust remitting to it the net proceeds received from the issuance and sale of
the Notes, to sell, transfer, assign, set over or otherwise convey to the Trust
without recourse all of its right, title and interest in and to the Intangible
Transition Property created in connection with such issuance (such sale,
transfer and assignment to include all revenues, collections, claims, rights,
payments, money or proceeds, including, without limitation, any revenues derived
from lump-sum payments of transition charges, condemnation proceedings or FERC
stranded cost recoveries which are allocable to the IFC Charges under the
Servicing Agreement). Such sale, transfer, assignment, set over and conveyance
by the Grantee contemplated under each Sale Agreement will be expressly stated
to be an absolute transfer pursuant to Section 18-108 of the Funding Law.
In the Sale Agreement, the Grantee will also acknowledge and consent to any
transfer, pledge, assignment or grant of a security interest by the Trust to the
Indenture Trustee for the benefit of the Noteholders pursuant to the Indenture,
of all right, title and interest of the Trust in, to and under the related
Intangible Transition Property and the related assets, and the assignment of any
or all of the Trust's rights and obligations under each Sale Agreement to the
Indenture Trustee.
REPRESENTATIONS AND WARRANTIES OF THE GRANTEE. In each Sale Agreement, the
Grantee will make representations and warranties to the Trust to the effect,
among other things, that:
(a) the information provided by the Grantee to the Trust with respect to
the applicable Intangible Transition Property and related assets is correct
in all material respects;
(b) immediately prior to the sale of the Intangible Transition Property
to the Trust, the applicable Intangible Transition Property is owned by the
Grantee free and clear of all security interests, liens, charges and
encumbrances, and is not subject to any defenses or counterclaims nor have
any such encumbrances, defenses or counterclaims been asserted with respect
thereto;
(c) the applicable Intangible Transition Property has been validly
transferred and sold to the Trust and all filings to be made by the Grantee
(including filings with the ICC under the Funding Law) necessary in any
jurisdiction to give the Trust a first priority perfected ownership interest
in such Intangible Transition Property will have been made and no further
action is required under Illinois law to maintain such ownership interest in
such Intangible Transition Property;
(d) (i) each Transitional Funding Order pursuant to which any
Intangible Transition Property has been created has been duly entered by the
ICC, and is final and non-appealable and is in full force and effect;
(ii) no Transitional Funding Order nor any Intangible Transition
Property created and established thereby nor the related IFC Charges
shall be subject to reduction, postponement, impairment or termination by
any subsequent action of the ICC;
(iii) the State of Illinois may not limit, alter, impair or reduce
the value of the Intangible Transition Property in a manner substantially
impairing the Indenture or the rights and remedies of the Noteholders
(and, consequently, may not revoke, reduce, postpone or terminate the
related Transitional Funding Order or the rights of the Noteholders to
receive IFC Payments and all other proceeds of the Intangible Transition
Property), until the Notes, together with interest thereon, are fully
paid and discharged (except to the extent of a temporary impairment that
the State of Illinois is able to demonstrate is necessary to advance a
significant and legitimate public purpose);
(iv) the process by which the related Transitional Funding Order was
adopted and approved and the related IFC Tariff was filed, and such
Transitional Funding Order and IFC Tariff themselves, comply with all
applicable laws, rules and regulations; and
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(v) no other approval or filing with any other governmental body is
required in connection with the grant of the related Intangible
Transition Property, except those that have been obtained or made;
(e) the assumptions used in calculating the related IFC Charges are
reasonable and made in good faith;
(f) upon the effectiveness of the applicable IFC Tariff;
(i) all of the related Intangible Transition Property constitutes a
current property right vested in the Grantee;
(ii) the related Intangible Transition Property includes, without
limitation, (A) the right, title and interest in the related IFC Charges
authorized under the related Transitional Funding Order, as adjusted from
time to time, (B) the right, title and interest in all revenues,
collections, claims, payments, money or proceeds of or arising from the
related IFC Charges set forth in such IFC Tariff, and (C) all rights to
obtain adjustments to the related IFC Charges pursuant to the related
Transitional Funding Order; and
(iii) the Grantee is entitled to impose and collect the related IFC
Charges in an aggregate amount equal to the principal amount of the
Notes, all interest on the Notes, all amounts required to be deposited in
the Reserve Subaccount, the Overcollateralization Subaccount and the
Capital Subaccount, and all related fees, costs and expenses in respect
of the Notes until they have been paid in full subject only to the
limitation set forth in the related Transitional Funding Order as to the
maximum dollar amount of Intangible Transition Property;
(g) the Grantee is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware, with
power and authority to own its properties and conduct its business as
currently owned or conducted and to execute, deliver and perform the terms
of such Sale Agreement;
(h) the execution, delivery and performance of such Sale Agreement have
been duly authorized by the Grantee by all necessary company action;
(i) such Sale Agreement constitutes a legal, valid and binding
obligation of the Grantee, enforceable against the Grantee in accordance
with its terms, subject to customary exceptions relating to bankruptcy and
equitable principles;
(j) the consummation of the transactions contemplated by such Sale
Agreement does not conflict with or result in a default under the Grantee's
operating agreement or certificate of formation or any agreement to which
the Grantee is a party or bound, result in the creation or imposition of any
lien upon the Grantee's properties pursuant to any agreement or violate any
law or any order, rule or regulation applicable to the Grantee;
(k) no governmental approvals, authorizations or filings are required
for the Grantee to execute, deliver and perform its obligations under such
Sale Agreement except those which have been previously obtained or made; and
(l) except as disclosed in such Sale Agreement, no court or
administrative proceeding or investigation is pending or, to the Grantee's
knowledge, threatened (i) asserting the invalidity of the Funding Law, such
Sale Agreement, any of the other related Basic Documents or the related
Notes, (ii) seeking to prevent the issuance of the related Notes or the
consummation of any of the transactions contemplated by such Sale Agreement
or any of the other related Basic Documents, (iii) seeking any determination
or ruling that could reasonably be expected to materially and adversely
affect the performance by the Grantee of its obligations under, or the
validity or enforceability of, such Sale Agreement, any of the other related
Basic Documents or the related Notes, or (iv) which
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could reasonably be expected to adversely affect the federal or state income
tax attributes of the related Notes.
COVENANTS OF THE GRANTEE. In each Sale Agreement, the Grantee will
covenant, among other things, that:
(a) so long as the Notes are outstanding, it will keep in full force and
effect its existence, rights and franchises as a limited liability company
under the laws of its jurisdiction of organization and its qualification to
do business to the extent necessary to protect the validity of the Basic
Documents;
(b) it will not sell, pledge, assign or transfer to any other person, or
grant, create, incur, assume, suffer to exist or otherwise assert any lien
on any of the related Intangible Transition Property or related assets;
(c) it shall defend the right, title and interest of the Trust and
Indenture Trustee in, to and under the related Intangible Transition
Property and related assets against all claims of third parties claiming
through or under the Grantee;
(d) it will hold all payments received by it in respect of the IFC
Charges or the proceeds thereof in trust for the Servicer and pay to the
Servicer all such payments no later than two Business Days after such
receipt by the Grantee;
(e) it shall notify the Trust and the Indenture Trustee promptly after
becoming aware of any lien on any of the related Intangible Transition
Property and related assets other than the conveyances under the Sale
Agreement and the Indenture;
(f) it shall comply with its organizational documents and all applicable
laws to the extent that failure to so comply would materially adversely
affect the Trust's or the Indenture Trustee's interest in the Intangible
Transition Property or related assets or under any Basic Document to which
it is party, or the Grantee's performance of its obligations under the Sale
Agreement or under the Basic Document to which it is party;
(g) it shall indicate in its financial statements that it is not the
owner of the Intangible Transition Property and shall not own or purchase
any Notes and, except with respect to taxes, not make any statement or
reference in respect of the Intangible Transition Property and related
assets that is inconsistent with the ownership interest of the Trust;
(h) it shall execute and file such filings, and cause to be executed and
filed such filings as may be required by law to fully preserve, maintain,
and protect the interests of the Trust in the related Intangible Transition
Property and related assets, including all filings required under the
Funding Law relating to the transfer of the related Intangible Transition
Property to the Trust;
(i) it shall institute any action or proceeding necessary to compel
performance by the ICC or the State of Illinois of any of their obligations
or duties under the Funding Law, the related Transitional Funding Order and
related Tariff, and will take such legal or administrative actions as may be
reasonably necessary to protect the Trust and Noteholders from claims, state
actions or other actions or proceedings of third parties which, if
successfully pursued, would result in a breach of any representation set
forth in such Sale Agreement;
(j) it shall not, prior to the date which is one year and one day after
the termination of the Indenture, acquiesce, petition or otherwise invoke or
cause any other person to invoke the process of any court or governmental
authority for the purpose of commencing or sustaining a case against, or
appointment of a receiver for, the Trust under any federal or state
bankruptcy, insolvency or similar law;
(k) it shall pay all material taxes, assessments and governmental
charges imposed upon it or any of its properties or assets if the failure to
pay any such taxes, assessments and governmental charges
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would, after any applicable grace periods, result in a lien on the
Intangible Transition Property or related assets;
(l) except as otherwise expressly permitted, the Grantee shall not
waive, amend, modify, supplement or terminate any Basic Document or any
provision thereof without the written consent of the Trust;
(m) without derogating from the absolute nature of the assignment
granted to the Trust under the Sale Agreement or the rights of the Trust,
the Grantee will not, without the prior written consent of the Trust, amend,
modify, waive, supplement, terminate or surrender, or agree to any
amendment, modification, supplement, termination, waiver or surrender of,
the terms of any collateral securing the Notes or the Basic Documents, or
waive timely performance or observance by Illinois Power or the Servicer
under the Grant Agreement or the Servicing Agreement, respectively;
(n) it shall promptly notify the Trust, in writing, of each default
under the Indenture and each material default on the part of Illinois Power
or the Servicer of their respective obligations under the Grant Agreement or
the Servicing Agreement;
(o) the Grantee will not elect, nor cause or permit the Trust to elect,
to be classified as an association taxable as a corporation for federal
income tax purposes; and
(p) the Grantee shall conduct its affairs separate from those of its
members or affiliates.
In addition, so long as any of the Notes are outstanding, the Grantee will
covenant in each Sale Agreement that it shall not, except as otherwise permitted
thereunder:
(a) sell, transfer, exchange or otherwise dispose of any of its
properties or assets;
(b) take any action that would be inconsistent with the Trust's absolute
and first priority ownership interest in the Intangible Transition Property
or related assets;
(c) engage in any business other than acquiring, owning, financing,
transferring, assigning and otherwise managing the Intangible Transition
Property and related assets;
(d) incur, assume, guarantee or otherwise become liable, directly or
indirectly, for any indebtedness;
(e) make any loan or advance or credit to, or guarantee (directly or
indirectly or by an instrument having the effect of assuring another's
payment or performance on any obligation or capability of so doing or
otherwise), endorse or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stocks or dividends of, or
own, purchase, repurchase or acquire (or agree contingently to do so) any
stock, obligations, assets or securities of, or any other interest in, or
make any capital contribution to, any other person; and
(f) make any expenditure (by long-term or operating lease or otherwise)
for capital assets (either realty or personalty) in an aggregate amount not
to exceed $25,000 in any calendar year.
AMENDMENT OF SALE AGREEMENTS. Each Sale Agreement may be amended from time
to time by the Grantee and the Trust, with prior written notice given to the
Rating Agencies and the prior written consent of the Indenture Trustee, but
without the consent of any of the Noteholders, to cure any ambiguity, to correct
or supplement any provisions in such Sale Agreement or for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
in such Sale Agreement or of modifying in any manner the rights of the
Noteholders; PROVIDED, HOWEVER, that such action shall not, as evidenced by an
officer's certificate delivered to the Indenture Trustee, adversely affect in
any material respect the interests of any Noteholder.
Each Sale Agreement may also be amended from time to time by the Grantee and
the Trust, with prior written notice given to the Rating Agencies and the prior
written consent of the Indenture Trustee
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and Noteholders holding not less than a majority in principal amount of the then
outstanding Notes of all Series affected thereby, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
such Sale Agreement or of modifying in any manner the rights of the Noteholders;
PROVIDED, HOWEVER, that no such amendment shall (a) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, IFC Collections
relating to the IFC Charges, or (b) reduce the percentage of the outstanding
principal amount of the Notes, the Noteholders of which are required to consent
to any such amendment, without the consent of the Noteholders of all the
outstanding Notes.
INDEMNIFICATION OBLIGATIONS OF THE GRANTEE. Each Sale Agreement will
provide that the Grantee will indemnify the Trust, the Indenture Trustee, and
Delaware Trustee and the Noteholders, and each of their respective officers,
directors, employees and agents for, and defend and hold harmless each such
person from and against, (a) any and all taxes (other than any taxes imposed on
the Noteholders) that may at any time be imposed on or asserted against any such
person as a result of the grant of the Intangible Transition Property to the
Grantee, or that may be imposed on or asserted against any such person under
existing law as of the closing date as a result of the Grantee's ownership and
assignment of the Intangible Transition Property, the Trust's issuance and sale
of the Notes, or the other transactions contemplated herein, including, in each
case, any sales, gross receipt, general corporation, tangible personal property,
privilege or license taxes (but excluding any taxes imposed as a result of a
failure of such person to properly withhold or remit taxes imposed with respect
to payments on any Note); and (b) any and all amounts of principal and interest
on the Notes not paid when due in accordance with their terms and the amount of
any deposits to the Trust required to have been made in accordance with the
terms of the Basic Documents which are not made when so required and any and all
liabilities, obligations, claims, actions, suits or payments of any kind
whatsoever that may be imposed on or asserted against any such person, together
with any reasonable costs and expenses incurred by such person, as a result of
the Grantee's breach of any of its representations, warranties or covenants
contained in such Sale Agreement. The indemnities described above will survive
the termination of such Sale Agreement and include reasonable fees and expenses
of investigation and litigation (including reasonable attorneys' fees and
expenses).
Notwithstanding the foregoing, but subject to the Grantee's covenant to
fully preserve, maintain and protect the interests of the Trust in the
Intangible Transition Property, the Grantee shall not be under any obligation to
appear in, prosecute or defend any legal action that shall not be incidental to
its obligations under each Sale Agreement.
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CERTAIN PAYMENT, WEIGHTED AVERAGE LIFE
AND YIELD CONSIDERATIONS
The rate of principal payments on each Class of Notes, the aggregate amount
of each interest payment on each Class of Notes and the actual maturity date of
each Class of Notes might be related, in part, to the rate and timing of receipt
of IFC Collections. Accelerated receipts of IFC Collections will not result in
principal payments on the Notes earlier than the dates in the Expected
Amortization Schedule since receipts in excess of the amounts necessary to make
any Scheduled Payment on the Notes will be deposited in the Reserve Subaccount
for distribution in accordance with such schedule, except in the event of an
early redemption or the acceleration of the maturity of the Notes after an Event
of Default, in which event such amounts will be released to pay such accelerated
amounts. However, delayed receipts of IFC Collections may result in principal
payments on the Notes that occur later than the related Expected Maturity Dates.
The actual payments on each date for each Class of Notes and the weighted
average life thereof will be affected primarily by the rate of IFC Collections
and the timing of receipt of such IFC Collections, as well as amounts available
in the Reserve Subaccount, the Overcollateralization Subaccount and the Capital
Subaccount. Since each IFC Charge will consist of a charge per kilowatt hour of
usage by the applicable class of Customers, the IFC Collections and the rate of
principal amortization on the Notes might depend, in part, on actual electricity
usage by Customers and the rate of delinquencies and write-offs, including any
defaults or delays in remitting by ARES who are allowed to collect IFC Charges
from Customers on behalf of the Servicer. Although the amounts of the IFC
Charges will be adjusted from time to time based in part on the actual rate of
IFC Collections, no assurances are given that the Servicer will be able to
forecast accurately actual energy usage and the rate of delinquencies and
write-offs or implement adjustments to the IFC Charges that will cause IFC
Collections to be received at any particular rate. See "Risk Factors
- --Limit on Amount of Intangible Transition Property Available to Pay Notes,"
"--Potential Servicing Issues," "--Uncertainties Related to the Electric
Industry Generally--Shrinking Customer Base as a Result of Municipalization,"
and "Description of the Intangible Transition Property--Adjustments to IFC
Charges." If IFC Collections are received at a slower rate than expected, a Note
may be retired later than expected. Because principal will only be paid at a
rate not faster than that contemplated in the Expected Amortization Schedules,
except in the event of an early redemption or the acceleration of the maturity
of the Notes after an Event of Default, the Notes are not expected to mature
earlier than scheduled. A payment on a date that is earlier than forecasted will
result in a shorter weighted average life, and a payment on a date that is later
than forecasted will result in a longer weighted average life.
No assurances are given that the representations made herein and in the
Prospectus Supplement as to the particular factors that will affect the rate of
IFC Collections, the relative importance of such factors, the percentage of the
principal balance of the Notes that will be paid as of any date or the overall
rate of IFC Collections will be realized.
In addition, pursuant to the terms of the Indenture, any Series of Notes may
be redeemed on any Payment Date if, after giving effect to payments that would
otherwise be made on such date, the outstanding principal balance of such Series
of Notes has been reduced to less than five percent of the initial principal
balance thereof. If specified in the Prospectus Supplement related to any Series
or Class of Notes, the Indenture may also permit the redemption of any such
Series or Class of Notes in full on any Payment Date on or prior to December 31,
2004 using proceeds received from the refinancing of any other Series or Class
of Notes, through the issuance of New Notes. The New Notes will be payable
solely out of the Intangible Transition Property and other Note Collateral.
Redemption will cause such Notes to be retired earlier than would otherwise be
expected and may adversely affect the yield to maturity of the Notes. There can
be no assurance as to whether any Series of Notes will be redeemed, or as to
whether Noteholders will be able to receive an equally attractive rate of return
upon reinvestment of the proceeds resulting from any such redemption.
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THE TRUST
The Trust will be a statutory business trust formed under the laws of the
State of Delaware pursuant to the Trust Agreement to be executed by the Delaware
Trustee and the Beneficiary Trustees (the Delaware Trustee and the Beneficiary
Trustees herein collectively referred to as the "Trustees"). The Trust will not
be an agency or instrumentality of the State of Illinois. Pursuant to the terms
of the Trust Agreement, the Trust will be created for the specific purpose of
acquiring and owning the Intangible Transition Property and the other Note
Collateral, issuing and registering the Notes, pledging its interest in the
Intangible Transition Property and other Note Collateral pursuant to the terms
of the Indenture, making payments on the Notes, distributing amounts released to
the Trust and performing other activities that are necessary, suitable or
convenient to accomplish these purposes. The Trust Agreement will not permit the
Trustees to engage in any activities not directly related to the Note financing.
The assets of the Trust will consist of the Intangible Transition Property,
the other Note Collateral, and any money retained by the Delaware Trustee on
behalf of the Trust to fund the Capital Subaccount. For a description of the
Notes to be issued by the Trust, see "Description of the Notes."
As of the date of this Prospectus, the Trust has not carried on any business
activities and has no operating history. Audited financial statements of the
Trust are included as an exhibit to this Prospectus. The fiscal year of the
Trust will be the calendar year.
The Trust's business will be managed by the Delaware Trustee. Under the
terms of the Trust Agreement, the Delaware Trustee must at all times: (1) be a
corporation satisfying the provisions of Section 3807(a) of the Delaware
Business Trust Act; (2) be authorized to exercise corporate trust powers; (3)
have a combined capital and surplus of at least $50,000,000 and be subject to
supervision or examination by federal or state authorities; and (4) have, or
have a parent which has, a long-term unsecured debt rating of at least "BBB-" by
S&P and at least "Baa3" by Moody's. If the Delaware Trustee at any time fails to
satisfy these provisions, if a receiver is appointed for it, if it is adjudged
bankrupt or if it is otherwise incapable of acting, it will be removed by the
Servicer and the Servicer will appoint a successor Delaware Trustee, which must
also meet the requirements described above.
The Delaware Trustee and the Servicer may jointly appoint a co-trustee for
the purpose of meeting any legal requirements of any state in which any part of
the estate of the Trust may be located. This co-trustee need not meet the
requirements described in the previous paragraph.
The authority of the Beneficiary Trustees under the Trust Agreement is
limited to the performance of the following duties: (1) to execute and file the
Registration Statement of which this Prospectus is a part, and to file any
supplements, amendments and exhibits to this Registration Statement, (2) to
register the Notes with applicable state securities commissions, and (3) to take
any necessary or appropriate related actions (including entering into certain
amendments to the Trust Agreement). The following two people have been named as
the Beneficiary Trustees in the Trust Agreement:
<TABLE>
<CAPTION>
NAME AGE TITLE
- ---------------------------------------------------------------- --- ---------------------
<S> <C> <C>
Cynthia G. Steward.............................................. 40 Beneficiary Trustee
Eric B. Weekes.................................................. 46 Beneficiary Trustee
</TABLE>
Cynthia G. Steward will be a Beneficiary Trustee of the Trust. Ms. Steward
has been employed by Illinois Power since 1980. She has held the position of
Controller since September 1995. Prior to being elected Controller, Ms. Steward
held positions as Manager of Employee Services and Director of Accounting.
Eric B. Weekes will be a Beneficiary Trustee of the Trust. Mr. Weekes is
Treasurer of Illinois Power and has held that position since January 1997. Prior
to being employed by Illinois Power, Mr. Weekes was employed by a unit of Kraft
Foods as Director of Financial Analysis, Budgets and Controls. Prior to being
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employed by Kraft Foods, Mr. Weekes was employed by General Foods and subsidiary
companies in several financial management positions.
As of the date of this Prospectus, none of the Trustees have received any
compensation for their services. The Beneficiary Trustees will not be
compensated by the Trust for their services on behalf of the Trust. The Delaware
Trustee will be paid from the assets of the Trust and will be reimbursed for its
reasonable expenses, including, without limitation, the reasonable compensation,
expenses and disbursements of any agents, representatives, experts and counsel
the Delaware Trustee employs in connection with performance of its duties under
the Trust Agreement.
The Trust Agreement provides that neither the Beneficiary Trustees nor the
Delaware Trustee shall be liable under any circumstances except for liabilities
arising from: (1) such Trustee's grossly negligent action; (2) such Trustee's
grossly negligent failure to act; or (3) such Trustee's own willful misconduct.
The Trust Agreement provides that the Servicer shall indemnify each of the
Delaware Trustee, the Beneficiary Trustees and their successors, assigns, agents
and servants to the fullest extent permitted by law against any liability
incurred with respect to their services under the Trust Agreement.
The Trust Agreement provides that the Trust shall dissolve on the earlier
of: (1) final distribution of all money and other property of the Trust in
accordance with the Trust Agreement and other Note financing documents; (2)
December 31, 2020; (3) if the Grantee elects, the day following the date when
the aggregate outstanding amount of the Notes is zero; or (4) judicial
dissolution of the Trust. The Grantee is not entitled to revoke or terminate the
Trust prior to this date. Any funds remaining in the Trust after this date of
dissolution, and after the satisfaction of all of the claims of creditors, are
to be distributed to the Grantee.
Under the Trust Agreement, no trustee shall have the power to commence a
voluntary proceeding in bankruptcy relating to the Trust, except that the
Delaware Trustee may commence such a proceeding with the prior approval of the
Grantee and delivery to the Delaware Trustee of a signed certificate from the
Grantee stating that the Grantee reasonably believes that the Trust is
insolvent.
The principal place of business of the Trust is c/o First Union Trust
Company, National Association, One Rodney Square, 920 King Street, 1st Floor,
Wilmington, Delaware 19801 and its telephone number is (302) 888-7532.
THE GRANTEE
The Grantee, Illinois Power Securitization Limited Liability Company, a
special purpose Delaware limited liability company, the sole member of which is
Illinois Power, was organized on September 10, 1998 for the principal purposes
of (a) initially owning the Intangible Transition Property established by the
Transitional Funding Orders, (b) entering into a Servicing Agreement with the
Servicer in respect of the Intangible Transition Property, (c) assigning all of
its right, title and interest in the Intangible Transition Property and the
Servicing Agreement to the Trust, and (d) engaging in only those other
activities incidental thereto and necessary, suitable or convenient thereto. In
addition, the Grantee's limited liability company agreement require it to
operate in a manner such that it should not be consolidated in the bankruptcy
estate of Illinois Power in the event Illinois Power becomes subject to such a
proceeding.
The executive offices of Grantee are located at 500 South 27th Street,
Decatur, Illinois 62521, and its telephone number is (217) 450-2435.
The Grantee is a recently formed special purpose limited liability company
and, as of the date of this Prospectus, the Grantee has not carried on any
business activities and has no operating history. Audited financial statements
of the Grantee are included as an exhibit to this Prospectus.
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<PAGE>
MANAGERS AND OFFICERS
In accordance with the Amended and Restated Limited Liability Company
Agreement of the Grantee, the management of the Grantee shall be vested entirely
in the Management Committee.
The following is a list of the managers of the Grantee. All such persons
have served in the capacities set forth below since September 10, 1998. The
officers and managers will devote such time as is necessary to the affairs of
the Grantee. The Grantee will have sufficient officers, managers and employees
to carry on its business.
<TABLE>
<CAPTION>
NAME AGE TITLE
- ---------------------------------------------------------------------------- --- ----------
<S> <C> <C>
Elizabeth S. Eldridge....................................................... 32 Manager
Douglas K. Johnson.......................................................... 41 Manager
Daniel L. Mortland.......................................................... 49 Manager
Cynthia G. Steward.......................................................... 40 Manager
Eric B. Weekes.............................................................. 46 Manager
</TABLE>
Elizabeth S. Eldridge is a Manager of the Grantee. From 1995 to the present,
Ms. Eldridge has held the position of Vice President of AMACAR Group, LLC, a
firm specializing in securitization consulting and services support. Prior to
that, from 1993 to 1995, Ms. Eldridge was an Assistant Vice President at First
Union National Bank specializing in securitization transactions.
Douglas K. Johnson is a Manager of the Grantee. From 1995 to the present,
Mr. Johnson has held the position of Chief Executive Officer of AMACAR Group,
LLC, a firm specializing in securitization consulting and services support. From
1994 to 1995, Mr. Johnson was Managing Director of the Asset Securitization
Department of First Union Capital Markets. Prior to that, from 1990 to 1994, Mr.
Johnson was Managing Director of the Asset-Backed Markets Division of First
Chicago NBD where he managed the distribution of asset-backed transactions.
Daniel L. Mortland is a Manager of the Grantee. Mr. Mortland has been
employed by Illinois Power since 1979. He has held the position of Assistant
Treasurer since January 1994. Prior to being appointed Assistant Treasurer, he
held positions as Director--Financial Planning and Administrator--Financial
Planning.
Cynthia G. Steward is a Manager of the Grantee. Ms. Steward has been
employed by Illinois Power since 1980. She has held the position of Controller
since September 1995. Prior to being elected Controller, Ms. Steward held
positions as Manager of Employee Services and Director of Accounting.
Eric B. Weekes is a Manager of the Grantee. Mr. Weekes is Treasurer of
Illinois Power and has held that position since January 1997. Prior to being
employed by Illinois Power, Mr. Weekes was employed by a unit of Kraft Foods as
Director of Financial Analysis, Budgets and Controls. Prior to being employed by
Kraft Foods, Mr. Weekes was employed by General Foods and Subsidiary companies
in several financial management positions.
No compensation has been paid by the Grantee to any officer or manager of
the Grantee since the Grantee was formed. The managers and any officers of the
Grantee, other than the two managers who are independent from Illinois Power
(the "Independent Managers"), will not be compensated by the Grantee for their
services on behalf of the Grantee; however, pursuant to the Administration
Agreement, the Grantee will reimburse Illinois Power for the services of those
officers and managers who are also employees of Illinois Power. The initial
compensation for both of the Independent Managers will be $7,500. Any officer
will serve in such capacity at the discretion of Illinois Power, as the sole
member of the Grantee. Illinois Power is an affiliate of the Grantee. The
Grantee's organizational documents limit, to the extent permitted by Delaware
law, the personal liability of each officer and manager of the Grantee to the
Grantee for monetary damages resulting from breaches of such officer's or
manager's duty of care. The
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Grantee's organizational documents provide that officers and managers of the
Grantee shall be indemnified against liabilities incurred in connection with
their services on behalf of the Grantee.
THE SERVICER
GENERAL
Illinois Power is engaged principally in the production, purchase,
transmission, distribution and sale of electricity and the distribution,
transportation and sale of natural gas, in the State of Illinois. Its service
area comprises approximately 15,000 square miles in northern, central and
southern Illinois. Illinois Power provides electric service at retail in 310
incorporated municipalities, adjacent suburban areas and numerous unincorporated
areas having an estimated aggregate population of 1,265,000. Illinois Power
provides gas service at retail in 257 incorporated municipalities, adjacent
suburban areas and numerous unincorporated areas having an estimated aggregate
population of 920,000. The larger cities which Illinois Power serves are
Decatur, East St. Louis (gas service only), Champaign, Danville, Belleville,
Granite City, Bloomington (electric service only), Galesburg, Urbana and Normal
(electric service only).
Illinois Power is regulated by the ICC and by the FERC.
ILLINOIS POWER CUSTOMER BASE, ELECTRIC ENERGY CONSUMPTION AND BASE RATES
Illinois Power's retail customer base is comprised of four revenue reporting
classes (each, a "Reporting Customer Class" and collectively, the "Reporting
Customer Classes"): residential, commercial, industrial and municipal customers.
Residential customers (including farms) are served on Illinois Power's Service
Classifications ("SC") 2 and 3. Small commercial customers are served on SC 10,
12 (grain drying usage), 13 (unmetered service), 14 (schools) and 15 (religious
facilities). Larger commercial and small industrial customers are generally
served on SC 11, 19 and 21. Large industrial customers are generally served on
SC 24 and 26 (firm service) and SC 30, 35 and 37 and Rider S (non-firm service).
Optional day-ahead Real-Time Pricing Service is available to non-residential
customers under Riders DA-RTP and DA-RTP-II. Outdoor lighting service is
provided under SC 39. Municipal customers are served on SC 41, 42 and 45.
Standby service for customer-owned generating facilities is provided under SC
22. In addition, a number of commercial and industrial customers take service
under individually negotiated contracts, including contracts entered into
pursuant to SC 29 (Economic Development Service) and Riders ECS and ECS Plus.
Under Illinois law (and in contrast to "contract service" and other competitive
services as defined in Section 16-102 which was added to the Act by the
Amendatory Act), these contracts are considered tariffs.
The Reporting Customer Classes are broad groups that include accounts with a
wide range of load characteristics served under a variety of rate designs. In
order to align the per-kilowatt-hour IFC Charges with the electricity rate
currently paid by a Customer more closely than would occur using the Reporting
Customer Classes or the current service classifications, each Transitional
Funding Order will provide that for purposes of billing IFC Charges, Illinois
Power's customer base will be divided into the following seven (7) customer
classes (each, an "IFC Customer Class" and collectively, the "IFC Customer
Classes") set forth below, and that the total IFC charges billed for each
Applicable Period shall be allocated among the IFC Customer Classes on the basis
of their respective percentages of the 1996 base rate revenues of
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<PAGE>
Illinois Power also set forth below. See "Description of the Intangible
Transition Property--Adjustments to IFC Charges."
<TABLE>
<CAPTION>
PERCENTAGE OF
1996 BASE RATE
IFC CUSTOMER CLASS DESCRIPTION REVENUES
- -------------------------------------------- ------------------------------- -----------------
<S> <C> <C>
Residential................................. SC 2 and 3 43.7%
Small Commercial............................ SC 10, 12, 13, 14 and 15 4.6%
Large Commercial............................ SC 11 and 19 24.0%
Municipal................................... SC 41, 42 and 45 3.0%
Industrial Firm............................. SC 21, 22 and 29 8.0%
Industrial High Load Factor Firm............ SC 24 and 26 15.2%
Industrial Non-Firm......................... SC 30, 35 and 37 1.5%
</TABLE>
However, the IFC Tariff authorized by the Transitional Funding Order will
provide that if the IFC Charges for any Customer Class increase to an amount
such that the forecasted revenues from Applicable Rates for such IFC Customer
Class during an Applicable Period are projected to be less than the IFC Charges
allocated to such IFC Customer Class for the same period, the deficiency shall
be ratably allocated among the remaining IFC Customer Classes based on their
percentages of the 1996 base rate revenues, recalculated to exclude such IFC
Customer Class.
The table below shows the billed electricity sales in megawatt hours, billed
revenues, average number of customers and average billed revenues per
kilowatt-hour, for each of the four (4) Reporting Customer Classes for the first
nine months of 1998 and each of the five (5) preceding years. Any updated
information relating to the table below will be set forth in a Prospectus
Supplement. There can be no assurances that
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<PAGE>
the electricity sales, billed revenues, number of customers, average billed
revenues per kilowatt hour or the composition of any of the foregoing will
remain at or near the levels reflected in the following table:
BILLED ELECTRICITY SALES, BILLED REVENUES AND CUSTOMERS
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998(2)
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
BILLED ELECTRICITY SALES (MW HOURS):
Residential....................... 4,600,145 4,534,601 4,744,598 4,771,417 4,704,198 3,879,362
Commercial........................ 3,264,855 3,583,456 3,785,633 3,876,383 3,919,311 3,086,398
Industrial........................ 8,153,278 8,621,879 8,655,006 8,398,830 8,442,601 6,526,052
Municipal......................... 316,626 345,734 366,990 367,033 367,893 285,908
------------ ------------ ------------ ------------ ------------ -------------
Total........................... 16,334,904 17,085,670 17,552,227 17,413,663 17,434,003 13,777,720
BILLED REVENUES ($000S):
Residential....................... 442,611 467,777 497,669 483,708 490,035 383,722
Commercial........................ 255,764 296,795 318,731 316,341 327,466 253,257
Industrial........................ 340,957 370,824 387,966 356,985 381,339 282,859
Municipal......................... 23,954 25,014 25,553 25,151 25,863 20,130
------------ ------------ ------------ ------------ ------------ -------------
Total........................... 1,063,286 1,160,410 1,229,919 1,182,185 1,224,703 939,968
AVERAGE NUMBER OF CUSTOMERS:
Residential....................... 499,366 494,156 490,727 495,855 497,085 504,745
Commercial........................ 56,801 56,378 56,180 56,792 57,041 58,304
Industrial(1)..................... 409 340 249 254 251 251
Municipal......................... 717 2,978 4,655 4,735 4,786 4,930
------------ ------------ ------------ ------------ ------------ -------------
Total........................... 557,293 553,852 551,811 557,636 559,163 568,230
AVERAGE BILLED REVENUE
(CENTS PER KILOWATT-HOUR):
Residential....................... 9.62 10.32 10.49 10.14 10.42 9.89
Commercial........................ 7.83 8.28 8.42 8.16 8.36 8.21
Industrial........................ 4.18 4.30 4.48 4.25 4.52 4.33
Municipal......................... 7.57 7.24 6.96 6.85 7.03 7.04
------------ ------------ ------------ ------------ ------------ -------------
</TABLE>
- ------------------------
(1) The decline in number of Industrial customers from 1993 to 1995 reflects a
change in Illinois Power's procedures for reporting number of customers.
Previously, each metered account was reported as a separate customer.
Beginning in 1994, separate metered accounts at the same premises are
reported as a single customer.
(2) Data is available for January 1, 1998 through September 30, 1998.
Principal factors influencing the number and electricity usage of
residential customers include population growth, weather (I.E., air conditioning
usage and, to a lesser extent, electric space heat usage), price, increased
saturation of electric appliances, the availability of more energy-efficient
appliances, changes in technology, and customer income. Principal factors
influencing the number and electricity usage of commercial customers (which
consist primarily of wholesale and retail trade establishments) include
population growth, service area economic growth, commercial floor space and
commercial employment. Principal factors influencing industrial electricity
usage include overall economic activity, developments in processes and
technologies using electricity, and increases in the efficiency with which
industrial processes use electric energy. The principal factors influencing
municipal electricity usage are similar to those which influence commercial
usage.
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<PAGE>
For the year ended December 31, 1997, the 10 largest Customers represented
approximately 11.6% of Illinois Power's billed revenues. There can be no
assurance that current Customers will remain Customers or that the levels of
Customer concentration in the future will be similar to those set forth above.
The table below shows the average revenue in cents per kilowatt-hour for the
twelve months ended December 31, 1997 for fully bundled services provided by
Illinois Power to customers in each of the seven (7) IFC Customer Classes, based
on tariffs then in effect but taking into account the fifteen percent (15%)
reduction in base rates for services charged to residential retail customers
(based on Illinois Power's rates in effect immediately prior to January 1,
1998), effective as of August 1, 1998:
<TABLE>
<CAPTION>
AVERAGE REVENUE IN CENTS
PER KILOWATT-HOUR FOR
IFC CUSTOMER CLASS FULLY-BUNDLED SERVICES(1)
- ------------------------------------------------------------------- -------------------------
<S> <C>
Residential........................................................ 8.28 CENTS
Small Commercial................................................... 9.85 CENTS
Large Commercial................................................... 7.44 CENTS
Municipal.......................................................... 8.85 CENTS
Industrial Firm.................................................... 5.79 CENTS
Industrial High Load Factor Firm................................... 4.60 CENTS
Industrial Non-Firm................................................ 1.41 CENTS
</TABLE>
- ------------------------
(1) Based on 1997 revenues excluding late charges, decommissioning charges,
add-on revenue taxes, charges for manufactured gas plant remediation costs,
and fuel adjustment charges and credits. In addition, the 1997 Residential
revenue per kilowatt-hour of 10.09 cents was reduced by 15% to represent the
rate reduction effective August 1, 1998. The resulting 1997 average revenue
per kilowatt-hour figures were further reduced by 0.301 cents per
kilowatt-hour to reflect the March 1998 base rate reduction associated with
elimination of Illinois Power's fuel adjustment clause.
Beginning October 1, 1999, Illinois Power will be required to offer to
certain non-residential customers in its service area delivery services through
which the customer can purchase electricity from other suppliers. By May 1,
2002, Illinois Power will be required to offer delivery services to all retail
customers in its service area. Customers electing to take delivery services and
purchasing their electricity from other suppliers will be required to pay
Illinois Power delivery services charges and, until no later than December 31,
2006 (unless extended by the ICC on petition by Illinois Power), transition
charges. The average charge per kilowatt-hour to a customer taking only delivery
services from Illinois Power is expected to be significantly lower than the
average revenue per kilowatt-hour shown in the immediately preceding table. See
"Electric Restructuring in Illinois--Amendatory Act Overview" and "Risk
Factors-- Reduction in Amount of Revenue from Applicable Rates."
FORECASTING ELECTRICITY CONSUMPTION
Illinois Power historically has prepared annual forecasts of electric energy
(kilowatt-hour) sales for the following year and several years thereafter. The
principal uses of the electric energy forecasts have been for shorter-term
budgeting and rate-setting purposes. Illinois Power has also prepared
longer-term forecasts of customer peak demand and energy consumption, primarily
for use in facilities planning. Illinois Power most recently updated its
electric energy forecasting models in 1997. Econometric models were developed
for use in forecasting electric energy sales to the residential, commercial and
industrial customer classes. These econometric models forecast electric energy
sales as a function of electricity price, income, employment, weather and other
economic factors that influence electricity sales. Known and measurable
industrial plant additions, expansions and closures are incorporated into the
electricity sales projections, based on information obtained by account managers
assigned to the larger customer accounts. Illinois Power uses economic and
demographic forecasts prepared by an independent economic forecasting and
consulting firm employed by Illinois Power separately from any transaction
contemplated by this
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<PAGE>
Prospectus as inputs to its forecasting models. Weather inputs to the
forecasting models are based on "normal" weather conditions which are based on
twenty-year averages for heating and cooling degree days.
FORECAST VARIANCES
Illinois Power conducts sales forecast variance analyses on a regular basis
to monitor how well forecasts track recorded consumption. This is important for
short-term resource procurement functions as well as for budgeting and financial
reporting. In addition, Illinois Power will use its annual sales forecast to
determine the appropriate levels of IFC Charges from time to time. As a result,
Illinois Power's ability to accurately predict energy consumption may affect the
timing of IFC Payments.
The table below shows annual variances for forecasts prepared by Illinois
Power for the following year. For example, the 1993 annual variance is based on
a forecast prepared in 1992. The annual variances for the aggregate combined
Reporting Classes referred to in the table below, which consist of all Reporting
Customer Classes, range from a low of 0.81% to a high of 2.64% in absolute
terms. Any updated information relating to the table below will be set forth in
a Prospectus Supplement. There can be no assurance that the future variance
between actual and expected consumption in the aggregate or by Reporting
Customer Class will be similar to the historical experience set forth below.
<TABLE>
<CAPTION>
ANNUAL FORECAST VARIANCES
ELECTRICITY SALES ----------------------------------------------------------------------------------
(MILLIONS OF KILOWATT-HOURS) 1993 1994 1995 1996 1997 1998(1)
- ----------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
RESIDENTIAL
Forecast................... 4,541,195 4,603,481 4,691,053 4,725,547 4,787,546 3,775,756
Actual..................... 4,600,145 4,534,601 4,744,598 4,771,417 4,704,198 3,879,362
Variance................... 1.30% (1.50%) 1.14% 0.97% (1.74%) 2.74%
COMMERCIAL
Forecast................... 3,170,922 3,306,498 3,709,448 3,832,250 3,930,531 2,883,435
Actual..................... 3,264,855 3,583,456 3,785,633 3,876,383 3,919,311 3,086,398
Variance................... 2.96% 8.38% 2.05% 1.15% (0.29%) 7.04%
INDUSTRIAL
Forecast................... 8,725,107 8,651,994 8,541,865 8,359,181 8,515,235 6,353,810
Actual..................... 8,153,278 8,621,879 8,655,006 8,398,830 8,442,601 6,526,052
Variance................... (6.55%) (0.35%) 1.32% 0.47% (0.85%) 2.71%
MUNICIPAL
Forecast................... 340,331 320,744 348,259 356,847 379,566 387,926
Actual..................... 316,626 345,734 366,990 367,033 367,893 285,908
Variance................... (6.97%) 7.79% 5.38% 2.85% (3.08%) (26.30%)
TOTAL
Forecast................... 16,777,555 16,882,717 17,290,625 17,273,825 17,612,878 13,400,927
Actual..................... 16,334,904 17,085,670 17,552,227 17,413,663 17,434,003 13,777,720
Variance................... (2.64%) 1.20% 1.51% 0.81% (1.02%) 2.81%
</TABLE>
- ------------------------
(1) Data is available from January 1, 1998 through September 30, 1998.
Illinois Power's forecast understated actual electric energy sales in three
of the five years. During the five-year period, there was no discernible trend
in the annual forecast variance. Many factors can contribute to annual variances
between actual electricity sales and the amount of sales forecasted in the
preceding year, including weather conditions (I.E., if actual weather is
significantly hotter or cooler than "normal" weather) and economic conditions.
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<PAGE>
CREDIT POLICY; BILLING; COLLECTIONS; RESTORATION OF SERVICE
Illinois Power's policies and procedures pertaining to credit (including
requirements for deposits from customers), billing, collections (including
procedures for disconnection of service for non-payment) and restoration of
service after disconnection, are subject to and controlled, to a material
extent, by Illinois statutory requirements, rules and regulations of the ICC and
Illinois Power's filed tariffs. These statutory provisions, ICC regulations and
tariffs may change from time to time. In addition, to the extent permitted by
statutory provisions and regulatory requirements, Illinois Power may change its
policies and procedures and seek approval of new tariffs governing these
activities from time to time. Illinois Power will agree, in each Grant Agreement
and the Servicing Agreement, not to initiate any such changes which are likely
to materially and adversely affect Illinois Power's ability to make timely
recovery of amounts billed to Customers, except for any such changes required by
applicable law. Under the Servicing Agreement, any such changes initiated by
Illinois Power will also apply to the servicing by Illinois Power, as the
Servicer, of the Intangible Transition Property.
CREDIT POLICY. Under Illinois law, Illinois Power is generally required to
provide service to all retail customers in its service area. Illinois Power's
review of the credit history of a new applicant for electric service generally
consists of a review to determine if the applicant has previously received
service from Illinois Power and, if so, whether there are any delinquent billed
amounts outstanding. Illinois Power relies on information provided by the
applicant, and on Illinois Power's customer information system, to determine
whether Illinois Power has previously served the customer and whether any
delinquent billed amounts are outstanding. In accordance with ICC regulations,
deposits may be required from certain applicants for service or existing
customer accounts to protect Illinois Power against losses. Accounts from which
deposits are most frequently obtained are new commercial and industrial
customers (I.E., applicants with limited or no credit history), and residential
customers with poor payment histories (as defined in ICC regulations). However,
under its current policies and procedures, Illinois Power does not request a
deposit from a residential customer after the first 24 months of service. The
maximum allowable amount of the deposit is one-sixth of the projected annual
billings to the customer for residential and small business applicants or
customers, and one-third of projected annual billing for other non-residential
customers. One-third of a requested deposit must be paid by the customer within
12 days and the balance within two billing periods. The deposit is refunded to a
new customer after one year if the customer has not been disconnected for
non-payment, and has not paid a bill after the due date more than three times
during the year. The deposit is refunded to an existing customer after one year
if the customer has not been disconnected for non-payment, and has not paid a
bill after the due date more than five times during the year.
BILLING PROCESS. Illinois Power generally bills each customer once every 27
to 33 days, with approximately an equal number of bills being distributed each
"Servicer Business Day" (any day other than a Saturday, a Sunday or a day on
which the Servicer's offices are not open for business). Those customers
receiving both electric service and gas service from Illinois Power receive a
combined bill for the charges incurred for both types of service during the
Billing Period. As of December 1, 1998, approximately 58% of Illinois Power's
electric service customers also received gas service from Illinois Power. For
the year ending December 31, 1997, Illinois Power mailed out an average of
32,000 bills on each Servicer Business Day to customers in its various customer
categories. Certain larger customer accounts are billed at or near the end of
the calendar month.
For accounts with potential billing errors, exception reports are generated
for manual review. This review examines accounts that have abnormally high or
low bills, potential meter-reading errors, and possible meter malfunctions.
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<PAGE>
Illinois Power may change its billing policies and procedures from time to
time. It is expected that any such changes would be designed to enhance Illinois
Power's ability to make timely recovery of amounts billed to customers.
COLLECTION PROCESS. Illinois Power receives approximately 71% of its total
bill payments, by number of bills (both electric and gas), via the United States
mail. Approximately 25% of such bill payments are received through third-party
collection agents (such as currency exchanges, grocery stores, banks and similar
entities which offer payment of utility bills as a convenience to their
customers) and 4% are received electronically.
Bills are processed and mailed to customers one day after the customer's
meter is read. Bills are considered past due if not paid within 21 calendar days
for residential accounts and within 14 calendar days for commercial and
industrial accounts. Payment is considered timely if received by mail not more
than two days after the due date. These payment periods are established by ICC
regulations. In accordance with statutory requirements and regulations
pertaining to procurement by governmental entities, certain federal, state,
county and municipal customers are allowed 62 days to make net payment and, in
addition, Illinois Power may be limited under Illinois law in its ability to
impose late payment charges on such Customers. Under Illinois Power's current
procedures, Customer payments are deposited in Illinois Power's bank accounts
and posted to customer accounts within one business day after receipt if payment
is made directly to Illinois Power and within two business days after receipt if
payment is made to a third-party collection agent of Illinois Power. Payments
are considered collected when posted to the customer's account.
Under Illinois law, Illinois Power must waive one late payment charge
incurred by a residential customer during each twelve-month period. A reminder
notice is mailed to the customer if payment has not been received on the account
by two days after the due date of the most recent bill. If non-payment
continues, a service disconnection notice may be sent to the customer through
operation of a scoring system calculated by Illinois Power's customer
information system. The scoring of an account for this purpose is based on
factors including the age of the arrearage and the customer's years of service,
non-sufficient funds payment history, and disconnection history. When dictated
by the scoring system, a service disconnection notice is mailed to notify the
customer of disconnection activity scheduled for seven days (ten calendar days)
after the date of the notice. If the scoring system does not dictate initiation
of a service disconnection notice, another reminder notice is included with the
customer's next bill.
Customers are entitled to enter into deferred payment arrangements in
accordance with statutory requirements, ICC regulations and Illinois Power's
filed tariffs. Such payment agreements allow the customer to make partial
payments, or to extend an arrearage, during periods of financial hardship.
Service disconnection is not implemented against a customer who has entered into
and is abiding by a payment agreement. In addition, Illinois statutory law and
ICC regulations prohibit electric utilities from disconnecting service under
certain conditions, such as when the temperature is projected to be below 32
degrees Fahrenheit or on weekends and holidays. Illinois Power may also be
subject to agreements with agencies administering the Low Income Home Energy
Assistance Fund which limits Illinois Power's ability to disconnect service to
customers with respect to whom Illinois Power is receiving payment under that
program.
Illinois Power sends an unpaid final account to an external collection
agency two days after the due date of the final bill. After 45 days with the
collection agency, an unpaid account is returned to Illinois Power and held for
15 days for any possible delayed payments. An account is charged off as
uncollectible if payment is not received by 63 days after the final bill due
date. The account is then returned to a collection agency for a period of one
year.
Subject to the restrictions of the Grant Agreement and the Servicing
Agreement, Illinois Power may change its collection policies and procedures from
time to time. It is expected that any such changes would be designed to enhance
Illinois Power's ability to make timely recovery of amounts billed to customers.
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RESTORATION OF SERVICE. Before restoring service that has been disconnected
for non-payment, Illinois Power has the right to require payment of all of the
following charges: (a) the total amount owing on an account including any
past-due balances, and a credit deposit, if requested; (b) any miscellaneous
charges associated with the reconnection of service (I.E., reconnection charges
and/or returned check charges); (c) any charges assessed for unusual costs
incurred incidental to the disconnection or reconnection of service which have
resulted from the customer's actions or negligence; and (d) any unpaid amounts
from other accounts in the name of the customer of record.
Illinois Power may change its restoration of service policies and procedures
from time to time. It is expected that any such changes would be designed to
enhance Illinois Power's ability to make timely recovery of amounts billed to
customers.
LOSS AND DELINQUENCY EXPERIENCE
The following table sets forth information relating to Illinois Power's
total billed electric revenues and net write-off experience for each Reporting
Customer Class for the first nine months of 1998 and each of the five preceding
years. Such historical information is presented herein because Illinois Power's
actual experience with respect to net write-offs and delinquencies may affect
the timing of IFC Payments. Any updated information relating to the table below
will be set forth in a Prospectus Supplement. There can be no assurance that the
future uncollectible experience in the aggregate or by Customer Class will be
similar to the historical experience set forth below. In addition, to the extent
that an ARES is providing consolidated billing for Illinois Power, there is no
assurance that such an ARES will apply the same credit and collection policies
to Customers as would be applied by Illinois Power, as the Servicer.
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998(1)
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
BILLED REVENUES ($000S):
Residential......................... $ 442,611 $ 467,777 $ 497,669 $ 483,708 $ 490,035 $ 383,722
Commercial.......................... 255,764 296,795 318,731 316,341 327,466 253,257
Industrial.......................... 340,957 370,824 387,966 356,985 381,339 282,859
Municipal........................... 23,954 25,014 25,553 25,151 25,863 20,130
------------ ------------ ------------ ------------ ------------ -------------
Total........................... $ 1,063,286 $ 1,160,410 $ 1,229,919 $ 1,182,185 $ 1,224,703 $ 939,968
</TABLE>
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998(1)
--------- --------- --------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
NET ELECTRIC UNCOLLECTIBLES ($000S):
Residential........................................ $ 2,973 $ 5,267 $ 4,111 $ 5,135 $ 4,425 $ 3,253
Commercial......................................... 426 859 461 621 557 323
Industrial......................................... 49 0 0 345 45 0
Municipal.......................................... 60 65 0 0 0 0
--------- --------- --------- --------- --------- ------
Total.......................................... $ 3,508 $ 6,191 $ 4,572 $ 6,101 $ 5,027 $ 3,576
</TABLE>
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998(1)
--------- --------- --------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C>
NET ELECTRIC UNCOLLECTIBLES AS A PERCENTAGE OF
BILLED REVENUE
Residential............................................. 0.67% 1.13% 0.83% 1.06% 0.90% 0.85%
Commercial.............................................. 0.17% 0.29% 0.14% 0.20% 0.17% 0.13%
Industrial.............................................. 0.01% 0.00% 0.00% 0.10% 0.01% 0.00%
Municipal............................................... 0.25% 0.26% 0.00% 0.00% 0.00% 0.00%
--- --- --- --- --- ---
Total............................................... 0.33% 0.53% 0.37% 0.52% 0.41% 0.38%
</TABLE>
- ------------------------
(1) Data is available for January 1, 1998 through September 30, 1998.
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When accounts are billed final, most bills are due 21 days later. If unpaid
after such 21-day period, a series of letters will be issued and the account
reported to Illinois Power's skip tracing program for internal and external
matching. If still unpaid after 90 days since the bill issue date, the account
will be written off and automatically referred to a collection agency.
On a monthly basis, net write-offs are simply the gross write offs for the
month, less recoveries (payments and adjustments) for that month. Although for
the most part, the write-offs are accounts that have reached the 90-day point
during any particular month, recoveries, while received during such month, could
be for accounts charged off in any previous period.
During the five-year period 1993 through 1997, Illinois Power's net electric
uncollectible revenues and net electric uncollectible revenues as a percentage
of billed revenues showed no discernible trend.
DELINQUENCIES
The following table sets forth information relating to the delinquency
experience of Illinois Power for the residential, commercial and industrial
Reporting Customer Classes for the last six months of 1994, the years 1995
through 1997, and the first six months of 1998. The table shows the portion of
amounts billed by Reporting Customer Class that remained uncollected 30 days, 60
days, 90 days, 120 days, 150 days and 180 days after billing. This historical
information is presented because Illinois Power's actual experience with respect
to delinquent accounts may be indicative of the delinquency experience for
billings of IFC Charges. Any updated information relating to the table below
will be set forth in a Prospectus Supplement. There can be no assurance that the
future delinquency experience in the aggregate or by Reporting Customer Class
will be similar to the historical experience set forth below.
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RESIDENTIAL, COMMERCIAL, INDUSTRIAL DELINQUENCY DATA
<TABLE>
<CAPTION>
1994(1) 1995 1996 1997 1998(2)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Percentage of Residential Billings not Collected within:
30 days..................................................... 26.58% 25.61% 26.34% 26.34% 24.91%
60 days..................................................... 13.01% 13.63% 14.66% 14.19% 13.43%
90 days..................................................... 8.11% 8.65% 9.42% 8.59% 7.94%
120 days.................................................... 5.30% 5.64% 5.99% 5.20% 4.48%
150 days.................................................... 3.55% 3.86% 3.96% 3.37% 2.86%
180 days.................................................... 2.49% 2.81% 2.86% 2.47% 2.26%
Percentage of Commercial Billings not Collected within:
30 days..................................................... 9.84% 8.61% 9.90% 11.32% 11.36%
60 days..................................................... 3.16% 2.85% 3.24% 2.83% 2.63%
90 days..................................................... 1.51% 1.31% 1.50% 1.25% 1.21%
120 days.................................................... 0.82% 0.66% 0.80% .62% 0.64%
150 days.................................................... 0.59% 0.45% 0.58% .43% 0.48%
180 days.................................................... 0.53% 0.37% 0.52% .39% 0.45%
Percentage of Industrial Billings not Collected within:
30 days..................................................... 4.07% 3.58% 3.85% 3.69% 2.59%
60 days..................................................... 0.97% 1.79% 1.82% 1.35% 1.61%
90 days..................................................... 0.45% 1.10% 1.19% .80% 1.44%
120 days.................................................... 0.38% 0.75% 1.01% .47% 0.80%
150 days.................................................... 0.37% 0.60% 0.95% .30% 0.40%
180 days.................................................... 0.37% 0.56% 0.95% .20% 0.30%
</TABLE>
- ------------------------
(1) Data is for July, 1994 through December, 1994.
(2) Data is for January, 1998 through June, 1998.
During the period shown above, Illinois Power's delinquency experience for
electric billings showed no discernible trend.
YEAR 2000 ISSUES--YEAR 2000 READINESS DISCLOSURE
Illinois Power uses various software, systems and technology throughout its
businesses that will be affected by the date change in the Year 2000. In
November 1996, Illinois Power deployed a Year 2000 project team to coordinate
the identification, evaluation and implementation of changes to computer systems
and applications necessary to achieve a Year 2000 date conversion with no effect
on customers or disruption to business operations. As of October 31, 1998,
Illinois Power had inventoried 99% of its systems and applications and estimated
that its assessment efforts were approximately 95% complete and that its
implementation efforts were approximately 34% complete. The schedule for the
implementation of the Year 2000 ready software and systems contemplates that
critical software and systems will be Year 2000 ready by mid-year 1999.
Illinois Power's approach to addressing Year 2000 compliance issues is to
upgrade or remediate software, systems and technology that are not Year 2000
ready and that are not otherwise being replaced in accordance with Illinois
Power's business plans. Illinois Power is in the process of replacing certain of
its financial software with new software that is Year 2000 ready. In other
cases, Illinois Power is upgrading or remediating existing software to versions
that are Year 2000 ready. Illinois Power is in the process of verifying its
computerized billing system for Year 2000 readiness and expects that its billing
system will be
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Year 2000 ready by the end of 1999. Additionally, Illinois Power is upgrading or
remediating certain software and engineering systems in its nuclear and fossil
electricity generation facilities and in its electrical and gas transmission and
distribution facilities. Illinois Power is also in the process of evaluating
whether Year 2000 compliance issues will affect any of its key suppliers.
The total cost of achieving Year 2000 compliance by remediating or upgrading
software and engineering systems that are not being replaced or upgraded in
accordance with business plans is currently estimated to be approximately $20.4
million through 1999. The amount expensed as of October 31, 1998 was $6.4
million.
Illinois Power has begun the process of developing contingency plans to
address the most reasonably likely worst case scenarios that could occur in the
event that various Year 2000 issues are not resolved in a timely manner.
Contingency planning is an ongoing process and is expected to continue through
the fourth quarter of 1999 as plans are reviewed and refined.
A failure to correct any critical Year 2000 processing problems prior to
January 1, 2000 could have material adverse operational and financial
consequences if the affected systems either cease to function or produce
erroneous data. For example, the Year 2000 issues could affect, among other
things, the ability of Illinois Power, as Servicer, and any ARES to bill and
collect the IFC Charges, both because of problems with their own systems and
problems that Customers may have in processing bills, and the ability of the
Servicer and ARES to meter usage. This could result in significant delays in IFC
Collections and, therefore, payments to Noteholders. The Year 2000 issues could
also affect usage by Customers if there are problems with the generation or
distribution of electricity which could cause the amount of Applicable Rates
from which IFC Charges will be deducted to be materially decreased or delayed.
See "Risk Factors--Reduction in Amount of Revenue from Applicable Rates."
SERVICING
SERVICING PROCEDURES
The Servicer, on behalf of the Trust, will, among other things, manage,
service and administer, and make collections in respect of, the Intangible
Transition Property pursuant to the Servicing Agreement between the Servicer and
the Grantee. The Servicer's duties will also include filing IFC Tariffs and
revisions thereto with the ICC to provide for billing and collection of the IFC
Charges and the corresponding adjustments in other charges billed to Customers,
calculation and billing of all amounts based on the IFC Charges, receipt and
posting of all IFC Payments, responding to inquiries of Customers and the ICC
with respect to the Intangible Transition Property and the IFC Charges,
accounting for collections and furnishing monthly, quarterly and annual
statements to the Trust and the Indenture Trustee and taking action in
connection with periodic revisions to the IFC Charges as described below.
Pending deposit into the Collection Account, all IFC Payments received by the
Servicer may be invested by the Servicer at its own risk and for its own
benefit, and need not be segregated from other funds of the Servicer. In the
Servicing Agreement, the Servicer will agree to continue to impose IFC Charges
(or equivalent amounts), collect IFC Charges (or equivalent amounts), and remit
IFC Charges (or equivalent amounts) in accordance with the Servicing Agreement
and to ensure that the IFC Charges (or equivalent amounts) are deducted from
Illinois Power's Applicable Rates and other charges in accordance with the Basic
Documents until the retirement of the Notes, unless expressly prohibited by law,
court or regulatory order. Under current law, no assurance can be given that the
Servicer is authorized to act in accordance with such agreement if the
applicable Transitional Funding Order is no longer in effect. However, in the
Grant Agreement Illinois Power has agreed to indemnify the Noteholders for
certain losses which may result if Illinois Power is unable to continue to
impose or collect IFC Charges or equivalent amounts.
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Each IFC Charge will be expressed as an amount per kilowatt-hour of
electricity sold or delivered to the applicable Customer, regardless of whether
the Customer purchases its electricity from Illinois Power or from another
electricity provider. However, in any Billing Period in which the total IFC
Charge to be billed to a Customer exceeds the amount of Applicable Rates for
which the Customer would otherwise be billed, the Servicer will only bill such
Customer an IFC Charge equal to the amount of Applicable Rates which the
Customer would otherwise be billed. The Servicer expects the aggregate amount of
the applicable IFC Charge to be separately identified on each Customer's bill
with an aggregate amount (which includes the applicable IFC Charges) to be paid
to the Servicer. Bills are sent to each Customer every 27 to 33 days.
Except as otherwise required by law with respect to taxes or similar
governmental charges included in bills and invoices to Customers, to the extent
that there is a shortfall in the amounts received by the Servicer from (a)
Customers it bills directly or (b) a third-party collection agent, including an
ARES, such shortfall will be allocated by the Servicer, in accordance with the
servicing standards set forth below, to the Trust and Illinois Power PRO RATA,
based on the amount of the Customer's bills constituting IFC Charges and the
amount constituting rates, other fees and charges not constituting IFC Charges
owed to Illinois Power or any successor (including charges for services other
than electric service, such as gas service, provided by Illinois Power), or to a
third party (such as taxes billed on behalf of the State of Illinois or a
municipality). If such amounts are billed and collected by Illinois Power for an
ARES pursuant to a consolidated billing arrangement, the total charges due to
the ARES will also be included in the proportional allocation of any partial
payment. In the event that an ARES or another Utility provides consolidated
billing to Customers for both the services provided by such ARES or other
Utility and delivery services provided by Illinois Power, partial payments made
to an ARES by such Customers are required by the Amendatory Act to be credited
first to amounts due to Illinois Power's tariffed services (including IFC
Charges collected on behalf of Noteholders), and the Servicer will allocate such
payments between the Trust and Illinois Power as otherwise described above.
Unless the Servicer is not the provider of electric service to Customers, the
Servicer will be entitled to disconnect service to any Customer who fails to pay
IFC Charges billed on behalf of the Trust in accordance with the ICC's
regulations and other applicable law pertaining to disconnections, in the same
manner as the Servicer may disconnect the Customer for failure to pay any
charges for tariffed service billed thereby.
In addition, the Servicer will agree to advance its own funds in order to
institute any action or proceeding necessary to compel performance by the ICC or
the State of Illinois of any of their obligations or duties under the Funding
Law, any Transitional Funding Order or any IFC Tariff, and to take such legal or
administrative actions, including defending against or instituting and pursuing
legal actions and appearing or testifying in hearings or similar proceedings, as
may be reasonably necessary to block or overturn any attempts to cause a repeal,
modification of, reversal or supplement to or judicial invalidation of, the
Amendatory Act, the Funding Law or the Transitional Funding Order or the rights
of holders of Intangible Transition Property, by legislative enactment or
otherwise, that would be adverse to the Grantee, the Trust or any Noteholders.
The Servicer would be entitled to reimbursement of its expenses advanced by it
in connection with such action or proceeding as an operating expense of the
Trust in accordance with the priority of payments as described in "Security for
the Notes--Allocations; Payments." The Servicer also will undertake to make
filings or initiate ICC proceedings to ensure that the dollar amount of
authorized Intangible Transition Property is adequate for the payment in full of
the Notes.
SERVICING STANDARDS AND COVENANTS
The Servicing Agreement will require the Servicer, in servicing and
administering the Intangible Transition Property, to employ or cause to be
employed procedures and exercise the same care it customarily employs and
exercises in servicing and administering bill collections for its own account.
Consistent with the foregoing, in addition to certain requirements described
in "The Servicer--Credit Policy; Billing; Collections; Restoration of Service"
above, the Servicer may, in its own discretion, waive any late payment charge or
any other fee or charge relating to delinquent payments, if any, and may waive,
vary or modify any terms of payment of any amounts payable by a Customer, in
each case, if such waiver or
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action (a) would be in accordance with the Servicer's customary practices or
those of any Successor Servicer with respect to comparable assets that it
services for itself, (b) would not materially adversely affect the Noteholders
and (c) would comply with applicable law. In addition, the Servicer may write
off any amounts that it deems uncollectible in accordance with its customary
practices.
In the Servicing Agreement, the Servicer will covenant that, in servicing
the Intangible Transition Property it will: (a) manage, service, administer and
make collections in respect of the Intangible Transition Property with
reasonable care and in accordance with applicable law, including all applicable
guidelines of the ICC, using the same degree of care and diligence that the
Servicer exercises with respect to bill collections for its own account; (b)
follow customary standards, policies and procedures for the industry in
performing its duties as Servicer; (c) use all reasonable efforts, consistent
with its customary servicing procedures, to enforce, and maintain rights in
respect of, the Intangible Transition Property; (d) comply with all laws
applicable to and binding on it relating to the Intangible Transition Property;
(e) make all required submissions and provide all required notifications with
the ICC with respect to adjustments to the IFC Charges as described below
herein; (f) maintain facilities sufficient to enable the Servicer to post IFC
Payments to Customer accounts within two Servicer Business Days of receipt by
the Servicer; and (g) continue to impose and collect all IFC Charges (as
adjusted from time to time), deduct IFC Charges and equivalent amounts from
Applicable Rates and remit such amounts to the Trust, in each such case unless
otherwise prohibited by applicable law or judicial or regulatory order in effect
at such time (under current law, no assurance can be given that the Servicer is
authorized to so act if the applicable Transitional Funding Order is no longer
in effect). The Servicer will acknowledge and agree, to the fullest extent
permitted by applicable law, that its obligations under the Servicing Agreement
shall remain in effect notwithstanding any breach of the State Pledge that is
being contested or any subsequent invalidation of the Funding Law, any
Transitional Funding Order, and/or the related IFC Tariff, and that no such
breach of the State Pledge or invalidation shall excuse the Servicer from
liability for any failure to perform its covenants under the Servicing Agreement
on account of any legal inability stemming from such breach of the State Pledge
or invalidation.
In addition, the Servicer will covenant that it will deduct and remit the
applicable amounts paid by Customers under any contracts which provide that such
Customer is obligated thereunder to pay an amount equal to the amount of IFC
Charges that would be billed if the services provided under such contract were
services subject to Applicable Rates. See "Description of the Intangible
Transition Property--The Transitional Funding Order Issued at the Request of
Illinois Power Company."
The Servicer will indemnify, defend and hold harmless the Grantee, the
Trust, the Delaware Trustee, the Indenture Trustee and the Noteholders against
any costs, expenses, losses, claims, damages and liabilities that may be imposed
on, incurred by or asserted against any such person as a result of (a) the
Servicer's willful misconduct, bad faith, gross negligence or reckless disregard
in the performance of its duties or observance of its covenants under the
Servicing Agreement, or (b) the Servicer's breach of any of its representations
or warranties thereunder.
REMITTANCES TO COLLECTION ACCOUNT
Under the terms of the IFC Tariff filed in connection with each Transitional
Funding Order, the Trust will begin to impose and collect the related IFC
Charges concurrently with the issuance of the Notes of any Series (each, a
"Series Issuance Date") and such right shall exist continuously thereafter in
accordance with the related Transitional Funding Order. The IFC Charges shall be
imposed and collected based upon the entire electricity consumption of Customers
included in bills issued to Customers on and after the related Series Issuance
Date, including that portion of the applicable Billing Period during which
electric service was provided prior to such Series Issuance Date.
The Servicing Agreement provides, among other things, that the Servicer will
collect the IFC Payments on behalf of the Trust, as assignee of the Grantee. The
Servicer will remit all IFC Payments to the Collection Account within two
Servicer Business Days of collection (each, a "Daily Remittance Date") unless
the Monthly Remittance Conditions are met, in which case the Servicer will remit
to the Collection Account on the tenth day of each month, or if such day is not
a Servicer Business Day, on the next Servicer
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Business Day (each such monthly date, a "Monthly Remittance Date"), all IFC
Payments collected by the Servicer during the immediately preceding Billing
Period (the "Monthly IFC Amount"). For these purposes, an IFC Payment will be
deemed to be collected by the Servicer when it is posted by the Servicer to the
customer's account. In accordance with the Servicer's current procedures for
processing customer payments, such posting occurs within one business day after
receipt if payment is made directly to Illinois Power and within two business
days after receipt if payment is made to a third-party collection agent of
Illinois Power.
A "Billing Period" is a period created by dividing the calendar year into
twelve consecutive periods of approximately twenty-one (21) Servicer Business
Days each, and represents the period during which the Servicer typically renders
a bill for electric service to each of its Customers.
The Servicing Agreement will require the Servicer to monitor Illinois
Power's receipt of any lump-sum payments of transition charges under Section
16-108(h) of the Funding Law, and, concurrently with such receipt, to set aside
and allocate for the benefit of the Trust, as proceeds of the Intangible
Transition Property, an amount equal to the product of (a) the IFC Charge which
is then in effect for such Customer at the time of receipt and (b) the total
number of kilowatt hours utilized to compute the amount of such lump-sum payment
of transition charges. The Servicing Agreement will also require the Servicer to
monitor Illinois Power's receipt of any revenues derived from condemnation
proceedings, FERC stranded cost recoveries or any other amounts which reflect
compensation for lost revenues which would otherwise have been attributable to
Applicable Rates (collectively, "Lost Revenue Recoveries"), and, concurrently
with the receipt thereof, to set aside and allocate for the benefit of the
Trust, as proceeds of the Intangible Transition Property, an amount equal to the
product of (a) the total dollar amount of such Lost Revenue Recoveries and (b) a
fraction, (1) the numerator of which equals the weighted average of the IFC
Charges applicable to all classes of Customers the revenues from which are
included in the calculation of such Lost Revenue Recoveries and (2) the
denominator of which equal the weighted average of the Applicable Rates charged
to such Customers, with such weighted averages to be in each case calculated
based on the respective IFC Charges and Applicable Rates applicable to such
classes for the most recent calendar year then ended.
NO SERVICER ADVANCES
The Servicer will not be obligated to, and consequently will not make any
advances of interest or principal on the Notes.
SERVICING COMPENSATION
On each Payment Date, the Servicer will be entitled to receive the Servicing
Fee specified in the related Prospectus Supplement. The Servicing Fee (together
with any portion of the Servicing Fee that remains unpaid from prior Payment
Dates) will be paid solely to the extent funds are available therefor as
described under "Security for the Notes--Allocations; Payments." The Servicing
Fee will be paid prior to the payment of any amounts in respect of interest on
and principal of the Notes. The Servicer will be entitled to retain as
additional compensation net investment income on IFC Payments received by the
Servicer prior to remittance thereof to the Collection Account and the portion
of late fees, if any, paid by Customers relating to the IFC Payments.
ALTERNATIVE RETAIL ELECTRIC SUPPLIERS AND OTHER THIRD-PARTY COLLECTORS
As part of the restructuring of the Illinois electric industry, certain
Customers will be allowed, beginning October 1, 1999, and all Customers will be
allowed as of May 1, 2002, to purchase electricity and related services from
ARES and from other Utilities rather than from Illinois Power. See "Electric
Industry Restructuring in Illinois--Alternative Retail Electric Suppliers." The
Amendatory Act requires Illinois Power to allow such ARES and other Utilities,
pursuant to a tariff to be filed by Illinois Power with, and approved by, the
ICC, to issue a single bill to any retail customer purchasing electricity or
related services from the ARES or other Utility and delivery services from
Illinois Power for both the services provided by the ARES or other Utility and
the delivery services provided by Illinois Power. The
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Amendatory Act provides that the tariff to be filed by Illinois Power shall (a)
require partial payments made by retail customers to be credited first to
Illinois Power's tariffed services (which would include the IFC Charges), (b)
impose commercially reasonable terms with respect to audit and collection,
including requests for deposits, (c) retain Illinois Power's right to disconnect
retail customers, if it does not receive payment for its tariffed services, in
the same manner that it would be permitted to if it had billed for the services
itself, and (d) require an ARES or other Utility that elects this billing option
to include on each bill to retail customers an identification of the Utility
(I.E., Illinois Power) providing the delivery services and a listing of the
charges applicable to these services.
In addition, under Illinois Power's current practices, customers are allowed
to pay their electricity bills indirectly through use of third-party collection
agents, such as currency exchanges, grocery stores, banks and similar entities
which offer payment of utility bills as a convenience to their customers. The
ICC will approve procedures in each Transitional Funding Order that would (a)
require any third party (including the collection agents described above and any
ARES that is required to collect IFC Charges) who bills or collects IFC Charges
on behalf of Customers to either (i) remit IFC Collections to the Servicer
within seven days of receipt or (ii) pay such IFC Charges to the Servicer within
fifteen days of billing by Illinois Power irrespective of whether payments have
been received from the ultimate customer, (b) allow the Servicer, within ten
days after a default by any such third-party collector in remitting IFC
Collections, to give notice thereof to the defaulting entity and if it does not
receive payment or other response initiating dispute resolution within five days
thereafter, to assume or transfer to another third party that defaulting
entity's billing and collection responsibilities, (c) grant the Servicer access
to information on total monthly kilowatt usage by the applicable Customers not
otherwise available to the Servicer to the extent reasonably required for the
Servicer to calculate and, if applicable, bill the related IFC Charges owed by
such Customers, and (d) allow the Servicer, pursuant to a tariff subject to
applicable regulatory approval, to impose such other terms with respect to
credit and collection policies as may be reasonably necessary to prevent the
then current rating of the Notes from being withdrawn or downgraded. Each IFC
Tariff filed in connection with the related Transitional Funding Order will
require a third-party collection agent, including any ARES, which assumes
payment responsibilities under clause (a)(ii) above and which does not have
investment-grade credit ratings (at least BBB- or the equivalent) to post a
deposit or comparable security equal to one month's estimated IFC Collections
collected by such third party collector.
In addition, each Transitional Funding Order will provide that (a) a
third-party collector who is or otherwise becomes obligated to remit payments to
Illinois Power on a more frequent basis than as set forth above, shall remit the
IFC Charges at the same time as such other payments and (b) a third-party
collector disputing payments shall pay the undisputed portion of its collections
to Illinois Power and shall pay the disputed amount under protest pending a
resolution of the matter, subject to refund with interest to the extent the
third-party collector is successful in the dispute. Such procedures will be
described in each Transitional Funding Order and in the related IFC Tariff filed
by Illinois Power under the Funding Law to authorize the imposition and
collection of the related IFC Charges. In the Servicing Agreement, the Servicer
will agree to implement procedures and policies to ensure that the remittance
obligations of ARES and other third-party collection agents are properly
enforced, including maintaining adequate records and information about such ARES
or third-party collectors, monitoring the performance of and payments by such
ARES or third-party collectors, enforcing the obligations of such ARES or
third-party collectors and implementing appropriate credit and collection
policies. Nonetheless, there can be no assurance that an ARES or other
third-party collection agent will apply the same credit and collection policies
and procedures to Customers as would be applied by Illinois Power. In addition,
the Servicer will have no meaningful ability to control the collection
procedures of ARES or other third-party collection agents who simply forward
payments on behalf of Customers and not pursuant to contractual arrangements
with Illinois Power or pursuant to consolidated billing procedures. See "Risk
Factors--Potential Servicing Issues--Possible Payment Delays Caused by Reliance
on Alternative Retail Electric Suppliers and Other Third-Party Collectors."
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SERVICER REPRESENTATIONS AND WARRANTIES
In the Servicing Agreement, the Servicer will make representations and
warranties to the Grantee, which will be assigned to the Trust, to the effect,
among other things, that: (a) the Servicer is a corporation duly organized and
in good standing under the laws of the State of Illinois, with power and
authority to own its properties and conduct its business as currently owned or
conducted and to execute, deliver and carry out the terms of the Servicing
Agreement; (b) the execution, delivery and carrying out of the Servicing
Agreement have been duly authorized by the Servicer by all necessary corporate
action; (c) the Servicing Agreement constitutes a legal, valid and binding
obligation of the Servicer, enforceable against the Servicer in accordance with
its terms subject to applicable insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws relating to or affecting creditors'
rights generally from time to time in effect, and to general principles of
equity; (d) the consummation of the transactions contemplated by the Servicing
Agreement does not conflict with the Servicer's articles of incorporation or
bylaws or any agreement to which the Servicer is a party or bound, result in the
creation or imposition of any lien upon the Servicer's properties or violate any
law or any order, rule or regulation applicable to the Servicer; (e) the
Servicer has all licenses necessary for it to perform its obligations under the
Servicing Agreement (except where the failure to have such licenses would not be
reasonably likely to have a material adverse effect on the Servicer or an
adverse effect on the Intangible Transition Property); (f) no governmental
approvals, authorizations or filings are required for the Servicer to execute,
deliver and perform its obligations under the Servicing Agreement except those
which have previously been obtained or made, and those which the Servicer is
required to make in the future; or other than the tariff filings required by the
Funding Law (which the Servicer covenants to make in a timely fashion); (g) the
calculations and assumptions used by the Servicer in calculating the IFC Charges
in effect from time to time are reasonable and made in good faith; and (h)
except as disclosed in the Servicing Agreement, no court or administrative
proceeding or investigation is pending or, to the Servicer's knowledge,
threatened (i) asserting the invalidity of, or seeking to prevent the
consummation of the transactions contemplated by, the Servicing Agreement or,
(ii) seeking a determination that might materially and adversely affect the
performance by the Servicer of its obligations thereunder, or (iii) relating to
the Servicer which could reasonably be expected to adversely affect the federal
or state income tax attributes of the Notes.
In the event of a breach by the Servicer of any of its representations and
warranties described in the preceding paragraph, the Servicer will indemnify,
defend and hold harmless the Grantee, the Trust, the Indenture Trustee, the
Delaware Trustee and the Noteholders against any losses, claims, damages,
liabilities and reasonable costs or expenses incurred as a result thereof.
STATEMENTS BY SERVICER
On or before the tenth day of each month, or, if such day is not a Servicer
Business Day, on the next Servicer Business Day, the Servicer will prepare and
furnish to the Grantee, the Trust, the Delaware Trustee, the Indenture Trustee
and the Rating Agencies a statement for the applicable calendar month (the
"Monthly Servicer's Certificate") setting forth the aggregate amount of IFC
Payments remitted by the Servicer to the Collection Account. In addition, the
Servicer will prepare, and the Indenture Trustee will furnish to the Noteholders
on each Payment Date the quarterly Servicer's Certificate described under
"Security for the Notes--Reports to Noteholders."
EVIDENCE AS TO COMPLIANCE
The Servicing Agreement will provide that a firm of independent public
accountants retained by the Servicer at the Servicer's expense will furnish to
the Grantee, the Trust, the Indenture Trustee and the Rating Agencies on or
before September 30 of each year, beginning September 30, 1999, a statement as
to compliance by the Servicer during the preceding twelve months ended June 30
(or, in the case of the first such statement, the period from the Closing Date
to June 30, 1999), with certain standards relating to the servicing of the
Intangible Transition Property. This report (the "Annual Accountant's Report")
shall state that such firm has performed certain procedures in connection with
the Servicer's compliance with the servicing procedures of the Servicing
Agreement, identifying the results of such procedures and including
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any exceptions noted. The Annual Accountant's Report will also indicate that the
accounting firm providing such report is independent of the Servicer within the
meaning of the Code of Professional Ethics of the American Institute of
Certified Public Accountants.
The Servicing Agreement will also provide for delivery to the Grantee, the
Trust, the Indenture Trustee and the Rating Agencies, on or before September 30
of each year, commencing September 30, 1999, of a certificate signed by an
officer of the Servicer stating that the Servicer has fulfilled its obligations
in all material respects under the Servicing Agreement throughout the preceding
twelve months ended June 30 (or in the case of the first such certificate, the
period from the Closing Date to June 30, 1999) or, if there has been a default
in the fulfillment of any such material obligation, describing each such
default. The Servicer has agreed to give the Grantee, the Trust, the Indenture
Trustee and the Rating Agencies notice of certain Servicer Defaults under the
Servicing Agreement.
Copies of such statements and certificates may be obtained by Noteholders by
a request in writing addressed to the Indenture Trustee.
CERTAIN MATTERS REGARDING THE SERVICER
The Servicing Agreement will provide that Illinois Power may not resign from
its obligations and duties as Servicer thereunder, except upon (a) either (i) a
determination that Illinois Power's performance of such duties is no longer
permissible under applicable law, disregarding any breach of the State Pledge
that is being contested, or any subsequent invalidation of the Funding Law, any
Transitional Funding Order and/or the related IFC Tariff filed in connection
therewith or (ii) satisfaction of the Rating Agency Condition and (b) to the
extent required under any Transitional Funding Order, the approval by the ICC of
such resignation. No such resignation will become effective until a Successor
Servicer has assumed Illinois Power's servicing obligations and duties under the
Servicing Agreement. The Servicer may perform its duties through agents or by
delegating them to a third party, but, in any event, the Servicer shall remain
liable for the performance of its duties and its obligations under the Servicing
Agreement. Unless expressly reimbursable under the Servicing Agreement, the fees
and expenses of any such agent or third party shall be paid by the Servicer.
The Servicing Agreement will further provide that neither the Servicer nor
any of its directors, officers, employees, and agents will be under any
liability to Grantee, the Indenture Trustee, the Trust, the Delaware Trustee,
the Noteholders, or any other person, except as provided under the Servicing
Agreement, for taking any action or for refraining from taking any action
pursuant to the Servicing Agreement, or for errors in judgment; provided,
however, that neither the Servicer nor any such person will be protected against
any liability that would otherwise be imposed by reason of willful misconduct,
bad faith or gross negligence in the performance of duties or by reason of
reckless disregard of obligations and duties thereunder. In addition, the
Servicing Agreement will provide that the Servicer is under no obligation to
appear in, prosecute, or defend any legal action that is not incidental to its
servicing responsibilities under the Servicing Agreement and that, in its
opinion, may cause it to incur any expense or liability.
Under the circumstances specified in the Servicing Agreement, any entity
into which the Servicer may be merged or consolidated, or any entity resulting
from any merger or consolidation to which the Servicer is a party, or any entity
succeeding to the properties and assets of the Servicer substantially as a whole
or, with respect to its obligations as Servicer, which corporation or other
entity in each of the foregoing cases assumes the obligations of the Servicer,
will be the successor of the Servicer under the Servicing Agreement.
SERVICER DEFAULTS
"Servicer Defaults" under the Servicing Agreement will include, among other
things, (a) any failure by the Servicer to make any required deposit into the
Collection Account, which failure continues unremedied for three Servicer
Business Days after written notice from the Grantee, the Trust or the Indenture
Trustee is received by the Servicer or after discovery by the Servicer; (b) any
failure by the
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Servicer or Illinois Power, as the case may be, duly to observe or perform in
any material respect any other covenant or agreement in the Servicing Agreement,
or any other Basic Document to which it is a party, which failure materially and
adversely affects the rights of Noteholders and which continues unremedied for
30 days after the giving of notice of such failure (i) to the Servicer or
Illinois Power, as the case may be, by the Grantee, the Trust or the Indenture
Trustee or (ii) to the Servicer or Illinois Power, as the case may be, by
holders of Notes evidencing not less than 25 percent in principal amount of the
outstanding Notes of all Series; (c) any representation or warranty made by the
Servicer in the Servicing Agreement shall prove to have been incorrect when
made, which has a material adverse effect on the Grantee, the Trust or the
Noteholders and which material adverse effect continues unremedied for a period
of 60 days after the giving of notice to the Servicer by the Grantee, the Trust
or the Indenture Trustee; and (d) certain events of insolvency, or similar
proceedings with respect to the Servicer or the Grantee and certain actions by
the Servicer or the Grantee indicating its insolvency, reorganization pursuant
to bankruptcy proceedings, or inability to pay its obligations.
RIGHTS UPON SERVICER DEFAULT
As long as a Servicer Default under the Servicing Agreement remains
unremedied, either the Indenture Trustee or holders of Notes evidencing not less
than 25 percent in principal amount of then outstanding Notes of all Series may
by written notice terminate all the rights and obligations of the Servicer
(other than the Servicer's indemnity obligation) under the Servicing Agreement,
whereupon a Successor Servicer appointed by the Trust, with the Grantee's prior
written consent, will succeed to all the responsibilities, duties and
liabilities of the Servicer under the Servicing Agreement and will be entitled
to compensation arrangements in accordance with the terms of the Servicing
Agreement, which compensation may be higher in amount than the amount paid to
the Servicer if the Successor Servicer is not able to bill IFC Charges together
with charges for electric utility services provided to Customers. In addition,
upon a Servicer Default, each of the following shall be entitled to apply to the
ICC for sequestration and payment of revenues arising with respect to the
Intangible Transition Property: (1) the Noteholders and the Indenture Trustee as
beneficiary of any statutory lien permitted by the Funding Law; (2) the Grantee
or its assignees; (3) the Trust; or (4) pledgees or transferees of the
Intangible Transition Property. If, however, a bankruptcy trustee or similar
official has been appointed for the Servicer, and no Servicer Default other than
such appointment has occurred, such trustee or official may have the power to
prevent the Indenture Trustee or the Noteholders from effecting a transfer of
servicing. See "Risk Factors--Bankruptcy and Creditors' Rights Issues--Possible
Adverse Effect on Noteholders as a Result of the Bankruptcy of the Servicer."
The Indenture Trustee may appoint, or petition the ICC or a court of competent
jurisdiction for the appointment of, a successor servicer which satisfies
criteria specified by the Rating Agencies if, within 30 days after notice of
termination is given, the Trust shall not have appointed a Successor Servicer.
The Indenture Trustee may make such arrangements for compensation to be paid to
any such Successor Servicer.
WAIVER OF PAST DEFAULTS
Noteholders holding at least a majority in principal amount of the then
outstanding Notes of all Series, on behalf of all Noteholders, may waive any
default by the Servicer in the performance of its obligations under the
Servicing Agreement and its consequences, except a default in making any
required deposits to the Collection Account in accordance with the Servicing
Agreement. The Servicing Agreement provides that no such waiver will impair the
Noteholders' rights with respect to subsequent defaults.
SUCCESSOR SERVICER
If for any reason a third party assumes the role of the Servicer under the
Servicing Agreement (in such role, the "Successor Servicer"), the Servicing
Agreement will require the Servicer being replaced to cooperate with the
Grantee, the Trust, the Delaware Trustee, the Indenture Trustee and the
Successor Servicer in terminating such replaced Servicer's rights and
responsibilities under the Servicing Agreement, including the transfer to the
Successor Servicer of all cash amounts then held by the Servicer for remittance
or subsequently acquired. The Servicing Agreement will provide that the Servicer
shall be liable
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for all reasonable out-of-pocket costs and expenses (including attorneys' fees
and expenses) incurred in transferring servicing responsibilities to the
Successor Servicer. Any Successor Servicer must satisfy the requirements of the
Act.
AMENDMENT
The Servicing Agreement may be amended by the parties thereto, without the
consent of the Noteholders, but with five Business Days' prior written notice to
the Rating Agencies and the consent of the Indenture Trustee, to cure any
ambiguity, to correct or supplement any provision or for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of that agreement or of modifying in any manner the rights of the Noteholders,
provided that such action will not, as certified in a certificate of an officer
of the Servicer delivered to the Indenture Trustee, the Grantee and the Delaware
Trustee, adversely affect in any material respect the interest of any
Noteholder. The Servicing Agreement may also be amended by the Servicer and
Grantee with the consent of the Indenture Trustee and the holders of Notes
evidencing at least a majority in principal amount of the then outstanding Notes
of all Series and Classes for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of such agreement or
of modifying in any manner the rights of the Noteholders; provided, however,
that no such amendment may (a) increase or reduce in any manner the amount of,
or accelerate or delay the timing of, IFC Collections or the timing of
adjustments to IFC Charges or (b) reduce the aforesaid percentage of the Notes
the holders of which are required to consent to any such amendment, without the
consent of the holders of all the outstanding Notes.
TERMINATION
The obligations of the Servicer and Grantee pursuant to the Servicing
Agreement will terminate upon the payment to the Indenture Trustee, and
corresponding distribution to the Noteholders of all amounts required to be paid
or distributed to them pursuant to the Servicing Agreement, the Notes and the
Indenture.
DESCRIPTION OF THE NOTES
GENERAL
The Trust will issue the Notes pursuant to the terms of an Indenture (the
"Indenture") between the Trust and the Indenture Trustee. The particular terms
of the Notes of any Series will be established in a supplement to the Indenture
or a Trust issuance certificate and, in either case, the material terms thereof
will be described in the related Prospectus Supplement. Although all material
terms of the Notes and the Indenture have been disclosed in this Prospectus,
this summary does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, the terms and provisions of the Indenture and
related supplements or Trust issuance certificates thereto, forms of which are
filed as exhibits to the Registration Statement.
The Notes may be issued in one or more Series, any one or more of which may
be comprised of one or more Classes. Classes of Notes may differ as to the
interest rate and the timing, sequential order and amount of distributions of
principal or interest, or both. Each Series of Notes may include one or more
Classes of Notes that accrue interest at a variable rate based on the index
described in the related Prospectus Supplement. Each such series will be secured
by a Swap Agreement, in addition to the security provided under the Indenture.
See "--Floating Rate Notes" below. While the specific terms of only the Series
of Notes (and the Classes of such Series (if any)) in respect of which this
Prospectus is being delivered will be described in the related Prospectus
Supplement, the terms of such Series and any Classes thereof will not be subject
to prior review of or consent of the holders of outstanding Notes. All Notes of
the same Series will be identical in all respects except for the denominations
thereof, unless such Series is comprised of more than one Class, in which case
all Notes of the same Class will be identical in all respects except for the
denominations thereof.
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All Notes issued under the Indenture will be payable solely from, and
secured solely by, a pledge of and lien on the Intangible Transition Property
and certain other funds as provided in the Indenture. See "Security for the
Notes--Pledge of Note Collateral." All Notes issued under the Indenture,
irrespective of when issued, shall have a parity lien on the Note Collateral,
although Floating Rate Notes shall also be secured by a Swap Agreement which
relates solely to such series. See "--Conditions of Issuance of Additional
Series and Acquisition of Subsequent Intangible Transition Property."
The Prospectus Supplement for a Series of Notes will describe, among other
things, the following terms of such Series and, if applicable, the Classes
thereof: (a) the designation of the Series and, if applicable, the Classes
thereof, (b) the principal amount, (c) the annual rate at which interest accrues
(the "Note Interest Rate"), or if the Trust has entered into a Swap Agreement
with respect to such Series, the index on which a variable rate of interest will
be based, (d) the dates on which payments of interest and principal are
scheduled to occur (each such date, a "Payment Date"), (e) the scheduled
maturity date (the "Expected Maturity Date") and the final termination date of
the Series (the "Final Maturity Date"), (f) the initial Adjustment Date of, and
the Reconciliation Period for, such Series, (g) the issuance date of the Series
(the "Series Issuance Date"), (h) the place or places for the payment of
principal and interest, (i) the authorized denominations, (j) the provisions for
optional redemption of such Series or Class by the Trust, (k) the Expected
Amortization Schedule for principal of such Series and, if applicable, the
Classes thereof, (l) the initial IFC Charges authorized in connection with the
issuance of such Series by the related Transitional Funding Order, and the IFC
Charges imposed as of the date of issuance of such Series, (m) the total dollar
amount of Intangible Transition Property authorized by the related Transitional
Funding Order, (n) any other material terms of such Series and any Class thereof
that are not inconsistent with the provisions of the Notes and that will not
result in any Rating Agency reducing or withdrawing its then current rating of
any outstanding Series or Class of Notes (the notification in writing by each
Rating Agency to the Servicer, the Grantee, the Indenture Trustee and the
Delaware Trustee that any action will not result in such a reduction or
withdrawal is referred to herein as the "Rating Agency Condition"), (o) the
identity of the Indenture Trustee, the Delaware Trustee and the Beneficiary
Trustees, and (p) the terms of any Swap Agreement executed solely to permit the
issuance of any Floating Rate Notes and the identity of any Swap Counterparty
related thereto.
The Notes do not constitute a debt, liability or other obligation of the
State of Illinois or of any political subdivision, agency or instrumentality
thereof and do not represent an interest in or obligation of Illinois Power or
any of its affiliates. The Notes will not be guaranteed or insured by Illinois
Power or any of its affiliates. Transitional Funding Orders authorizing issuance
of the Notes do not constitute a pledge of the full faith and credit of the
State of Illinois or of any of its political subdivisions. The issuance of the
Notes under the Funding Law shall not directly, indirectly or contingently
obligate the State of Illinois or any political subdivision thereof to levy or
to pledge any form of taxation therefor or to make any appropriation for their
payment.
INTEREST AND PRINCIPAL
Interest will accrue on the principal balance of a Class of Notes at the per
annum rate either specified in or determined in the manner specified in the
related Prospectus Supplement and will be payable on the Payment Dates specified
in the related Prospectus Supplement. IFC Collections, including such amounts as
are available in the Reserve Subaccount and the Overcollateralization Subaccount
and, if necessary, the amounts available in the Capital Subaccount, will be used
to make interest payments to the Noteholders of each Class on each Payment Date
with respect thereto. See "Security for the Notes--Allocations; Payments."
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Principal of the Notes of each Class will be payable in the amounts and on
the Payment Dates specified in the related Prospectus Supplement, but only to
the extent that amounts in the Collection Account are available therefor, and
subject to the other limitations described below. See "Security for the
Notes--Allocations; Payments." Each Prospectus Supplement will set forth the
Expected Amortization Schedule for each Series of Notes and, if applicable, the
Classes of such Series. On any Payment Date, unless an Event of Default has
occurred and is continuing and the Notes have been declared due and payable, the
Indenture Trustee will make principal payments on the Notes only until the
outstanding principal balances thereof have been reduced to the principal
balances specified in the applicable Expected Amortization Schedule for such
Payment Date (each, a "Scheduled Payment"). Any IFC Collections in excess of
amounts payable as (a) expenses of the Grantee, the Delaware Trustee and the
Indenture Trustee (including the Servicing Fee and Administration Fee), (b)
payments of interest on and principal of the Notes, (c) allocations to the
Capital Subaccount, and (d) allocations to the Overcollateralization Subaccount
(all as described herein under "Security for the Notes--Allocations; Payments")
will be retained by the Indenture Trustee in the Reserve Subaccount for payment
on subsequent Payment Dates. However, if insufficient IFC Collections are
received with respect to any Payment Date, and amounts in the Collection Account
are not sufficient to make up the shortfall, principal of any Class of Notes may
be payable later than expected as described herein. See "Risk
Factors--Uncertainties Associated with Unusual Asset Type" and "Risk
Factors--Nature of the Notes--Uncertain Payment Amounts and Weighted Average
Life." The entire unpaid principal amount of the Notes of all Series will be due
and payable on the date on which an Event of Default (other than a breach by the
State of Illinois of the State Pledge) has occurred and is continuing, if the
Indenture Trustee or holders of not less than a majority in principal amount of
the Notes of all Series then outstanding have declared the Notes to be
immediately due and payable. See "Security for the Notes--Events of Default;
Rights Upon Event of Default."
Unless the context requires otherwise, all references in this Prospectus to
principal of the Notes of a Series includes any premium that might be payable
thereon if Notes of such Series are redeemed, as described in the related
Prospectus Supplement.
PAYMENTS ON THE NOTES
The Indenture Trustee will pay on each Payment Date to the holders of each
Class of Notes all principal and interest then due with respect thereto (other
than Special Payments, as defined in the Indenture) or, in the case of Floating
Rate Notes, in lieu of such interest, payments under any related Swap Agreement
with respect to interest. Each such payment other than the final payment with
respect to any Note will be made by the Indenture Trustee to the holders of
record of the Notes of the applicable Class on the Record Date in respect of
such Payment Date. The final payment on any Note, however, will be made only
upon presentation and surrender of such Note at the office or agency of the
Indenture Trustee specified in the notice given by the Indenture Trustee with
respect to such final payment.
If interest on the Notes of any Series is not paid when due, such defaulted
interest shall be paid (plus interest on such defaulted interest at the
applicable Note Interest Rate to the extent lawful) to the persons who are
Noteholders on a subsequent Special Record Date (as defined in the Indenture),
which date shall be at least five Business Days prior to the Special Payment
Date (as defined in the Indenture). The Trust shall fix or cause to be fixed any
such Special Record Date and Special Payment Date, and, at least 20 days before
any such Special Record Date, the Trust shall mail to each affected Noteholder a
notice that states the Special Record Date, the Special Payment Date and the
amount of defaulted interest (plus interest on such defaulted interest) to be
paid.
At such time, if any, as the Notes of any Series are issued in the form of
Definitive Notes and not to DTC or its nominee, payments by the Indenture
Trustee with respect to such Class on a Payment Date or a Special Payment Date
will be made by check mailed to each holder of a Definitive Note of such Class
of record on the applicable Record Date at its address appearing on the register
maintained with respect to the Notes of such Series, or, upon application by a
holder of any Class of Notes in the principal amount of
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$10,000,000 or more to the Indenture Trustee not later than the applicable
Record Date, by wire transfer to an account maintained by the payee in New York,
New York. The final payment for each Class of Notes, however, will be made only
upon presentation and surrender of the Notes of such Class at the office or
agency of the Indenture Trustee specified in the notice given by the Indenture
Trustee of such final payment. The Indenture Trustee will mail such notice of
the final payment to the Noteholders of such Class no later than five days prior
to such final payment date, specifying the date set for such final payment and
the amount of such payment.
If any Special Payment Date or other date specified herein for distribution
of any payments to Noteholders is not a Business Day, payments scheduled to be
made on such Special Payment Date or other date may be made on the next
succeeding Business Day and no interest shall accrue upon such payment during
the intervening period. "Business Day" means any day other than a Saturday, a
Sunday or a day on which banking institutions or trust companies in New York,
New York, Wilmington, Delaware, Chicago, Illinois, or Charlotte, North Carolina,
are, or DTC is, authorized or obligated by law, regulation or executive order to
remain closed.
FLOATING RATE NOTES
If any Floating Rate Notes of any Class are offered, the Trust will enter
into one or more swap agreements (each, a "Swap Agreement") with a counterparty
(each, a "Swap Counterparty") identified and having the terms described in the
related Prospectus Supplement. Generally, pursuant to a Swap Agreement, on each
Payment Date, the Trust will be obligated to pay to the Swap Counterparty,
solely from IFC Collections, an amount equal to the interest due on a notional
amount equal to the principal amount of the Class of Notes outstanding as of the
close of business on the preceding Payment Date, after giving effect to all
payments of principal made to the Floating Rate Noteholders on such preceding
Payment Date calculated at a fixed swap rate (which rate will be used to
calculate IFC Payments), and the Swap Counterparty will be obligated to pay to
the Trust an amount equal to the product of (a) the floating rate on the
Floating Rate Notes and (b) the principal balance of the Floating Rate Notes as
of the close of business on the preceding Payment Date after giving effect to
all payments of principal made to the Floating Rate Noteholders on such
preceding Payment Date. See "Risk Factors--Nature of the Notes-- Additional
Risks of Floating Rate Notes."
NO THIRD-PARTY CREDIT ENHANCEMENT
It is not currently anticipated that the Notes will have the benefit of any
third-party credit enhancement, such as guarantees, letters of credit, insurance
or the like. If, however, any Series of Notes is to be issued with any
third-party credit enhancement, it will be set forth in the related Prospectus
Supplement.
REGISTRATION AND TRANSFER OF THE NOTES
If so specified in the related Prospectus Supplement, one or more Classes of
Notes will be issued in definitive form and will be transferable and
exchangeable at the office of the registrar identified in the related Prospectus
Supplement. Unless otherwise specified in the related Prospectus Supplement, no
service charge will be made for any such registration or transfer of such Notes,
but the owner may be required to pay a sum sufficient to cover any tax or other
governmental charge.
Each Class of Notes will be issued in the minimum initial denominations set
forth in the related Prospectus Supplement and, except as otherwise provided in
the related Prospectus Supplement, in integral multiples thereof.
Payments of interest and principal will be made on each Payment Date to the
Noteholders in whose names the Notes were registered on the related Record Date.
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BOOK-ENTRY REGISTRATION
If so specified in the related Prospectus Supplement, one or more Classes of
Notes initially may be Book-Entry Notes, which are initially represented by one
or more Notes registered in the name of Cede, as nominee of DTC, or another
securities depository, and are available only in the form of book-entries. Any
Book-Entry Notes will initially be registered in the name of Cede, the nominee
of DTC. Holders may also hold Notes of a Class through Centrale de Livraison de
Valeurs Mobilieres S.A. ("CEDEL") or the Euroclear System ("Euroclear") (in
Europe), if they are participants in such systems or indirectly through
organizations that are participants in such systems.
Cede, as nominee for DTC, will hold the global Note or Notes. CEDEL and
Euroclear will hold omnibus positions on behalf of their participants through
customers' securities accounts in CEDEL's and Euroclear's names on the books of
their respective Depositaries (as defined herein) which in turn will hold such
positions in customers' securities accounts in the Depositaries' names on the
books of DTC. Citibank, N.A. will act as depositary for CEDEL and Morgan
Guaranty Trust Company of New York will act as depositary for Euroclear (in such
capacities, the "Depositaries").
DTC is a limited-purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York UCC, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act, as amended. DTC
was created to hold securities for its participating organizations, which are
the Participants, and facilitate the settlement of securities transactions
between Participants through electronic book-entry changes in accounts of its
Participants, thereby eliminating the need for physical movement of securities.
Participants include underwriters, securities brokers and dealers, banks, trust
companies and clearing corporations and may include certain other organizations.
Indirect access to the DTC system also is available to Indirect Participants,
which are others such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly.
Transfers between Participants will occur in accordance with DTC rules.
Transfers between CEDEL Participants (as defined herein) and Euroclear
Participants (as defined herein) will occur in accordance with their respective
rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary. Cross-market transactions will require
delivery of instructions to the relevant European international clearing system
by the counterparty in such system in accordance with its rules and procedures
and within its established deadlines (European time). The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to its Depositary to take action to effect
final settlement on its behalf by delivering or receiving Notes in DTC, and
making or receiving distributions in accordance with normal procedures for
same-day funds settlement applicable to DTC. CEDEL Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities received in CEDEL or
Euroclear as a result of a transaction with a Participant will be made during
subsequent settlement processing and dated the Business Day following the DTC
settlement date. Such credits or any transactions in such Notes settled during
such processing will be reported to the relevant Euroclear or CEDEL Participant
on such Business Day. Cash received in CEDEL or Euroclear as a result of sales
of Notes by or through a CEDEL Participant or a Euroclear Participant to a DTC
Participant will be received with value on the DTC settlement date but will be
available in the relevant CEDEL or Euroclear cash account only as of the
Business Day following settlement in DTC.
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Noteholders that are not Participants or Indirect Participants but desire to
purchase, sell or otherwise transfer ownership of, or other interests in, Notes
may do so only through Participants and Indirect Participants. In addition,
Noteholders will receive all payments of principal of and interest on the Notes
from the Indenture Trustee through DTC and its Participants. Under a book-entry
format, Noteholders will receive distributions after the related Payment Date,
as the case may be, because, while payments are required to be forwarded to
Cede, as nominee for DTC, on each such date, DTC will forward such distributions
to its Participants, which thereafter will be required to forward them to
Indirect Participants or holders of beneficial interests in the Notes. The
Indenture Trustee, the Grantee, the Servicer and any paying agent, transfer
agent or registrar may treat the registered holder in whose name any Note is
registered (expected to be Cede) as the absolute owner thereof (whether or not
such Note is overdue and notwithstanding any notice of ownership or writing
thereon or any notice to the contrary) for the purpose of making payments and
for all other purposes.
Unless and until Definitive Notes (as defined below) are issued, it is
anticipated that the only "holder" of Book-Entry Notes of any Series will be
Cede, as nominee of DTC. Noteholders will only be permitted to exercise their
rights as Noteholders indirectly through Participants and DTC. All references
herein to actions by Noteholders thus refer to actions taken by DTC upon
instructions from its Participants, and all references herein to payments,
notices, reports and statements to Noteholders refer to payments, notices,
reports and statements to Cede, as the registered holder of the Notes, for
distribution to the beneficial owners of the Notes in accordance with DTC
procedures.
While any Book-Entry Notes of a Series are outstanding (except under the
circumstances described below), under the rules, regulations and procedures
creating and affecting DTC and its operations (the "Rules"), DTC is required to
make book-entry transfers among Participants on whose behalf it acts with
respect to the Book-Entry Notes and is required to receive and transmit payments
of principal of, and interest on, the Book-Entry Notes. Participants with whom
Noteholders have accounts with respect to Book-Entry Notes are similarly
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Noteholders. Accordingly, although Noteholders will
not possess physical Notes, the Rules provide a mechanism by which Noteholders
will receive payments and will be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of holders of
beneficial interests in the Notes to pledge Notes to persons or entities that do
not participate in the DTC system, or otherwise take actions in respect of such
Notes, may be limited due to the lack of a Definitive Note for such Notes.
DTC has advised the Indenture Trustee that it will take any action permitted
to be taken by a Noteholder under the Indenture and the related Prospectus
Supplement only at the direction of one or more Participants to whose account
with DTC the Notes are credited. Additionally, DTC has advised the Indenture
Trustee that it may take actions with respect to the Noteholders' interest that
might conflict with other of its actions with respect thereto.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations ("CEDEL
Participants") and facilitates the clearance and settlement of securities
transactions between CEDEL Participants through electronic book-entry changes in
accounts of CEDEL Participants, thereby eliminating the need for physical
movement of securities. Transactions may be settled in CEDEL in any of 28
currencies, including United States dollars. CEDEL provides to CEDEL
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. CEDEL interfaces with domestic markets in several
countries. As a professional depository, CEDEL is subject to regulation by the
Luxembourg Monetary Institute. CEDEL Participants are recognized financial
institutions around the world including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations and may include any underwriters, agents or dealers
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with respect to a Series of Notes offered hereby. Indirect access to CEDEL is
also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a CEDEL
Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of the
Euroclear System ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
securities and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 29 currencies, including United
States dollars. The Euroclear System includes various other services, including
securities lending and borrowing, and interfaces with domestic markets in
several countries generally similar to the arrangements for cross-market
transfers with DTC described above. The Euroclear System is operated by Morgan
Guaranty Trust Company of New York, Brussels, Belgium office (the "Euroclear
Operator"), under contract with Euroclear Clearance System S.C., a Belgian
cooperative corporation (the "Cooperative"). All operations are conducted by the
Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for Euroclear on behalf of
Euroclear Participants. Euroclear Participants include banks (including central
banks), securities brokers and dealers and other professional financial
intermediaries. Indirect access to Euroclear is also available to other firms
that clear through or maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation that is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of Euroclear and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific securities to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Payments with respect to Notes held through CEDEL or Euroclear will be
credited to the cash accounts of CEDEL Participants or Euroclear Participants in
accordance with the relevant systems' rules and procedures, to the extent
received by its Depositary. Such payments will be subject to tax reporting in
accordance with relevant United States tax laws and regulations. See "Material
United States Federal Tax Consequences." CEDEL or the Euroclear Operator, as the
case may be, will take any other action permitted to be taken by a Noteholder
under the Indenture or the relevant Prospectus Supplement on behalf of a CEDEL
Participant or Euroclear Participant only in accordance with its relevant rules
and procedures and subject to its Depositary's ability to effect such actions on
its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of Notes among participants of DTC, CEDEL and
Euroclear, they are under no obligation to perform or continue to perform such
procedures and such procedures may be discontinued at any time.
DEFINITIVE NOTES
Notes of a Series will be issued in registered form to Noteholders, or their
nominees, rather than to DTC (such Notes being referred to herein as "Definitive
Notes") only under the circumstances provided in the Indenture, which will
include (a) the Administrator (initially, Illinois Power) advising the Indenture
Trustee in writing that DTC is no longer willing or able to properly discharge
its responsibilities as nominee
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and depository with respect to the Book-Entry Notes of such Series and the
Administrator being unable to locate a qualified successor, (b) the
Administrator (with written notice to the Indenture Trustee), electing to
terminate the book-entry system through DTC, or (c) after the occurrence of a
Servicer Default, holders of Notes representing not less than 50 percent of the
aggregate outstanding principal amount of the Notes of any Series maintained as
Book-Entry Notes advising the Indenture Trustee, the Administrator, the Trust
and DTC in writing that the continuation of a book-entry system through DTC (or
a successor thereto) is no longer in the best interests of Noteholders of such
Series. Upon issuance of Definitive Notes of a Series, such Notes will be
transferable directly (and not exclusively on a book-entry basis) and registered
holders will deal directly with the Indenture Trustee with respect to transfers,
notices and payments.
Upon surrender by DTC of the definitive securities representing the Notes
and instructions for registration, the Indenture Trustee will issue the Notes in
the form of Definitive Notes, and thereafter the Indenture Trustee will
recognize the holders of such Definitive Notes as Noteholders under the
Indenture.
Payment of principal of and interest on the Notes will be made by the
Indenture Trustee directly to Noteholders in accordance with the procedures set
forth herein and in the Indenture and the related Prospectus Supplement.
Interest payments and principal payments will be made to Noteholders in whose
names the Definitive Notes were registered at the close of business on the
related Record Date. Payments will be made by check mailed to the address of
such Noteholder as it appears on the register maintained by the Indenture
Trustee or in such other manner as may be provided in the related Trust issuance
certificate or supplement to the Indenture and except that certain payments will
be made by wire transfer as described in the Indenture. The final payment on any
Note (whether Definitive Notes or Notes registered in the name of Cede),
however, will be made only upon presentation and surrender of such Note on the
final payment date at such office or agency as is specified in the notice of
final payment to Noteholders. The Indenture Trustee will provide such notice to
registered Noteholders not later than the fifth day prior to the month of the
Final Payment Date.
Definitive Notes will be transferable and exchangeable at the offices of the
transfer agent and registrar, which initially will be the Indenture Trustee. No
service charge will be imposed for any registration of transfer or exchange, but
the transfer agent and registrar may require payment of a sum sufficient to
cover any tax or other governmental charge imposed in connection therewith.
OPTIONAL REDEMPTION
Pursuant to the terms of the Indenture, a Series of Notes may be redeemed on
any Payment Date if, after giving effect to payments that would otherwise be
made on such date, the outstanding principal balance of such Series of Notes has
been reduced to less than five percent of the initial principal balance thereof.
If specified in the Prospectus Supplement related to any Series or Class of
Notes, the Indenture may also permit the redemption of such Series or Class of
Notes in full for cash on any Payment Date on or prior to December 31, 2004
using proceeds received from the issuance of any additional Series or Class of
Notes (the "New Notes"). The New Notes will be payable solely out of the
Intangible Transition Property and other Note Collateral and will have no more
than a PARI PASSU lien thereon vis-a-vis all existing Series of Notes. In
addition, a Series of Notes shall be subject to redemption if and to the extent
provided in the related Prospectus Supplement.
No redemption shall be permitted under the Indenture unless each Rating
Agency with respect to any Notes that will remain outstanding after such
redemption shall have affirmed the then current rating of all such outstanding
Notes. Upon any redemption of any Series or Class of Notes, the Trust will have
no further obligations under the Indenture with respect thereto. The Notes may
be so redeemed in all instances of optional redemptions permitted by the
Indenture upon payment of the outstanding principal amount of the Notes to be
redeemed and accrued but unpaid interest thereon as of the date of redemption.
Notice of such redemption will be given by the Trust to the Indenture Trustee
and the Rating Agencies not less than 25 days nor more than 50 days prior to the
date of redemption, and written notice
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shall also be given to each holder of Notes to be redeemed, by first-class mail,
postage prepaid, mailed not less than five days nor more than 25 days prior to
the applicable date of redemption.
CONDITIONS OF ISSUANCE OF ADDITIONAL SERIES AND ACQUISITION OF SUBSEQUENT
INTANGIBLE TRANSITION PROPERTY
The Trust's acquisition of Subsequent Intangible Transition Property and the
issuance of any additional Series of Notes with respect thereto is subject to
the following conditions, among others:
(a) appropriate documentation required by the Indenture and Trust
Agreement, including supplements thereto, shall have been authorized,
executed and delivered by all parties required to do so by the terms of the
relevant documents;
(b) the Grantee shall have irrevocably assigned all of its right, title
and interest in such Subsequent Intangible Transition Property to the Trust
and a filing required by Section 18-107 of the Funding Law shall have been
made with respect to such assignment;
(c) the Rating Agency Condition shall have been satisfied with respect
to such transactions;
(d) Illinois Power shall have delivered to the Grantee, the Trust, the
Delaware Trustee and the Indenture Trustee an opinion of independent tax
counsel and/or a ruling from the IRS (as selected by, and in form and
substance reasonably satisfactory to, Illinois Power) to the effect that,
for federal income tax purposes, (i) such issuance, and the transfer of the
Note proceeds to Illinois Power, will not result in gross income to the
Grantee, the Trust or Illinois Power and (ii) such issuance will not
adversely affect the characterization of the then outstanding Notes as
obligations of Illinois Power;
(e) no Event of Default shall have occurred and be continuing under the
Indenture;
(f) as of the date of issuance, the Trust shall have sufficient funds
available to pay the purchase price for such Subsequent Intangible
Transition Property, and all conditions to the issuance of a new series of
Notes shall have been satisfied or waived; and
(g) delivery by the Trust to the Indenture Trustee of certain
certificates and opinions specified in the Indenture.
LIST OF NOTEHOLDERS
Upon written request of any Noteholder or group of Noteholders of any Series
or of all outstanding Series of Notes evidencing not less than 10 percent of the
aggregate outstanding principal amount of the Notes of such Series or all
Series, as applicable, the Indenture Trustee will afford such Noteholder or
Noteholders access during business hours to the current list of Noteholders of
such Series or of all outstanding Series, as the case may be, for purposes of
communicating with other Noteholders with respect to their rights under the
Indenture.
The Indenture does not provide for any annual or other meetings of
Noteholders.
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SECURITY FOR THE NOTES
GENERAL
The Notes issued under the Indenture are payable solely from and secured
solely by a pledge of and lien of the Intangible Transition Property and the
other Note Collateral as provided in the Indenture. See "Description of the
Intangible Transition Property." As noted under the heading, "Description of the
Notes," the Trust will issue the Notes pursuant to the terms of the Indenture.
The particular terms of the Notes of any series will be established in a
supplement to the Indenture or a Trust issuance certificate and material terms
thereof will be described in the Prospectus Supplement for the related Series of
Notes.
This summary does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the terms and provisions of the
Indenture and supplements or Trust issuance certificate related thereto, forms
of which are filed as exhibits to the Registration Statement.
PLEDGE OF NOTE COLLATERAL
To secure the payment of principal of and interest on the Notes, the
Indenture will grant to the Indenture Trustee a security interest in all of the
Trust's right, title and interest in and to (a) all of the Intangible Transition
Property and, to the fullest extent permitted by law, all proceeds thereof, (b)
the Grant Agreements, Sale Agreements and Servicing Agreements, (c) the
Collection Account and all amounts or investment property on deposit therein or
credited thereto from time to time, (d) with respect to any Floating Rate Notes
only, any Swap Agreement entered into with respect to the issuance of such
Floating Rate Notes, (e) all rights to compel Illinois Power, as Servicer (or
any successor) to file for and obtain adjustments to the IFC Charges in
accordance with Section 18-104(d) of the Funding Law, the Transitional Funding
Orders and all IFC Tariffs filed with the ICC in connection therewith, (f) all
present and future claims, demands, causes and choses in action in respect of
any or all of the foregoing and all payments on or under the foregoing and (g)
all proceeds in respect of any or all of the foregoing; provided, however, that
(1) the cash transferred to the Trust by the Grantee which is not held in the
Capital Subaccount, including cash that has been released to the Grantee or as
it directs following retirement of any Series of Notes, (2) net investment
earnings which have been released to the Trust by the Indenture Trustee pursuant
to the terms of the Indenture, (3) the Overcollateralization Amount that has
been released to the Grantee or as it directs following retirement of any Series
of Notes, and (4) amounts deposited with the Trust on any Series Issuance Date
for payment of costs of issuance with respect to the related Series of Notes
(together with any interest earnings thereon) will not be covered by the
foregoing security interest. The foregoing assets to which the Trust, as
assignee of Grantee, will grant the Trustee a security interest are referred to
collectively as the "Note Collateral" herein.
SECURITY INTEREST IN NOTE COLLATERAL
CREATION AND PERFECTION OF SECURITY INTEREST IN INTANGIBLE TRANSITION
PROPERTY UNDER THE FUNDING LAW. Section 18-107 of the Funding Law provides that
neither Intangible Transition Property, nor any right, title or interest in the
Intangible Transition Property, shall constitute property in which a security
interest may be created under the UCC nor shall any such rights be deemed
proceeds of any property which is not Intangible Transition Property. Rather,
Section 18-107(c) of the Funding Law provides that a valid and enforceable
security interest in Intangible Transition Property shall attach and be
perfected only by the means set forth in that Section 18-107(c). Specifically,
Section 18-107(c) provides that, to the extent that transitional funding
instruments, such as the Notes, are purported to be secured by Intangible
Transition Property, as specified in the applicable Transitional Funding Order,
the lien of the transitional funding instruments shall attach automatically to
such Intangible Transition Property from the time of issuance of the
transitional funding instruments. Section 18-107(c) of the Funding Law provides
that such lien shall be a valid and enforceable security interest in Intangible
Transition Property, securing the transitional funding instruments, and shall be
continuously perfected if, before the date of issuance of the applicable
transitional funding instruments, or within no more than 10 days thereafter, a
filing has been made by or
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on behalf of the holder with the Chief Clerk of the ICC stating that such
transitional funding instruments have been issued.
The liens provided under Section 18-107(c) are enforceable against the
electric utility, any assignee, grantee or issuer and all third parties,
including judicial lien creditors. Moreover, a perfected lien in Intangible
Transition Property is a continuously perfected security interest in all then
existing or thereafter arising revenues and proceeds arising with respect to
such Intangible Transition Property, whether or not the electric power and
energy included in the calculation of such revenues and proceeds have been
provided. The lien created by Section 18-107(c) is perfected and ranks prior to
any other lien, including any judicial lien, which subsequently attaches to the
Intangible Transition Property, and to any other rights created by the
Transitional Funding Order or any revenues or proceeds of the foregoing.
The relative priority of the lien created by Section 18-107(c) of the
Funding Law is not defeated or adversely affected by (a) changes to the
Transitional Funding Order or to the related instrument funding charges payable
by any retail customer, class of retail customers or other person or group of
persons obligated to pay such charges or (b) (subject to the tracing
requirements of federal bankruptcy law) the commingling of revenues arising with
respect to Intangible Transition Property or grantee instruments with funds of
the Utility or other funds of the assignee, issuer or grantee.
Section 18-107(c)(5) of the Funding Law provides that the ICC shall maintain
segregated records which reflect the date and time of receipt of all filings
made under Section 18-107(c). See "--Filings Made With Respect to the Intangible
Transition Property."
RIGHT OF FORECLOSURE. Section 18-107(c)(4) of the Funding Law provides
that, if an event of default occurs under the transitional funding instruments,
the holders thereof or their authorized representatives, as secured parties, may
foreclose or otherwise enforce the lien in the Intangible Transition Property
securing the transitional funding instruments, subject to the rights of any
third parties holding prior security interests therein (perfected in the manner
described in such subsection). Upon application by such holders or their
authorized representatives, the ICC shall order the sequestration and payment to
the holders or their authorized representatives of revenues arising with respect
to the Intangible Transition Property pledged to the holders. Section
18-107(c)(4) of the Funding Law provides that any such order shall remain in
full force and effect notwithstanding any bankruptcy, reorganization or other
insolvency proceedings with respect to the Utility, grantee, assignee or issuer.
See "Risk Factors--Bankruptcy and Creditors' Rights Issues--Possible Adverse
Effect on Noteholders as a Result of the Bankruptcy of Illinois Power, the
Grantee or the Trust."
FILINGS MADE WITH RESPECT TO THE INTANGIBLE TRANSITION PROPERTY. Illinois
Power, as Servicer, will pledge in the Servicing Agreement to file with the ICC
on or before the date of issuance of any Series of Notes the filing required by
Section 18-107(c)(1) to perfect the lien of the Indenture Trustee in the
Intangible Transition Property. The Grantee will represent in the Sale
Agreement, at the time of issuance of any Series of Notes, that no prior filing
has been made under the terms of Section 18-107 of the Funding Law with respect
to such Intangible Transition Property, other than a filing which provides the
Indenture Trustee with a first priority perfected security interest in such
Intangible Transition Property on a parity basis with that securing any
outstanding Notes, if any. In addition, the Grantee will pledge in the Sale
Agreement to make any filings necessary under the UCC to perfect the lien of the
Indenture Trustee in the Note Collateral.
SECURITY INTEREST IN ADDITIONAL NOTE COLLATERAL
Certain items of the Note Collateral do not constitute Intangible Transition
Property and the perfection of the Indenture Trustee's security interest in such
items of Note Collateral is, therefore, subject to the UCC or common law and not
Section 18-107 of the Act. These items consist of the rights of the Trust in (a)
any Grant Agreement, any Sale Agreement or the Servicing Agreement, (b) the
Capital Subaccount or any other funds on deposit in the Collection Account which
do not constitute IFC
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Collections, (c) any interest rate exchange agreements, and (d) proceeds of the
foregoing items. Additionally, any contractual rights of the Trust against
Customers (other than the right to impose instrument funding charges as defined
in the Funding Law and rights otherwise included in the definition of intangible
transition property) would be collateral to which the UCC applies. As a
condition to the issuance of any Series of Notes, the Trust shall have made all
filings and taken any other action required by the UCC or common law to perfect
the lien of the Indenture Trustee in all such items included in the Note
Collateral which do not constitute Intangible Transition Property, and will
covenant to take all actions necessary to maintain or preserve such lien and
security interest on a first priority basis. Each of the Grantee and the Trust
will represent, at the time of issuance of any Series of Notes, that no prior
filing has been made with respect to such party under the terms of the UCC,
other than a filing which provides the Indenture Trustee with a first priority
perfected security interest in such Note Collateral on a parity basis with that
securing any outstanding Notes.
DESCRIPTION OF INDENTURE ACCOUNTS
COLLECTION ACCOUNT. Pursuant to the Indenture, a segregated trust account
(the "Collection Account") will be established by the Trust with an Eligible
Institution. The Collection Account will be held by the Indenture Trustee for
the benefit of the Noteholders and the Trust. The Collection Account will
consist of four subaccounts: a general subaccount (the "General Subaccount"), a
reserve subaccount (the "Reserve Subaccount"), a subaccount for the
Overcollateralization Amount with respect to each Series of Notes (the
"Overcollateralization Subaccount") and a capital subaccount (the "Capital
Subaccount"). All amounts in the Collection Account not allocated to any other
subaccount will be allocated to the General Subaccount. Unless the context
indicates otherwise, references herein to the Collection Account include each of
the subaccounts contained therein.
An "Eligible Institution" means (a) the corporate trust department of the
Indenture Trustee or (b) a depository institution organized under the laws of
the United States of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank) (i) which has either (A) a
long-term unsecured debt rating of "AAA" by S&P and "A2" by Moody's or (B) a
certificate of deposit rating of "A-l +" by S&P and "P-l" by Moody's, or any
other long-term, short-term or certificate of deposit rating acceptable to the
Rating Agencies and (ii) whose deposits are insured by the Federal Deposit
Insurance Corporation (the "FDIC").
Funds in the Collection Account may be invested in any of the following
(subject to additional restrictions in the Indenture): (a) direct obligations
of, or obligations fully and unconditionally guaranteed as to timely payment by,
the United States of America; (b) demand deposits, time deposits, certificates
of deposit or bankers' acceptances of Eligible Institutions which are described
in clause (b) of the preceding paragraph; (c) commercial paper (other than
commercial paper issued by Illinois Power or any of its affiliates) having, at
the time of investment or contractual commitment to invest, a rating in the
highest rating category from each Rating Agency from which a rating is
available; (d) money market funds which have the highest rating from each Rating
Agency from which a rating is available; (e) repurchase obligations with respect
to any security that is a direct obligation of, or fully guaranteed by, the
United States of America or certain agencies or instrumentalities thereof,
entered into with certain depository institutions or trust companies; or (f) any
other investment permitted by each Rating Agency (collectively, the "Eligible
Investments"), in each case which mature on or before the Business Day preceding
the next Payment Date. The Indenture Trustee will have access to the Collection
Account for the purpose of making deposits in, and withdrawals from, the
Collection Account in accordance with the Indenture.
The Servicer will remit IFC Payments to the Collection Account in the manner
described under "Servicing--Remittances to Collection Account."
GENERAL SUBACCOUNT. The General Subaccount will hold all funds held in the
Collection Account that are not held in the other three subaccounts. The
Servicer will remit all IFC Payments to the General Subaccount. On each Payment
Date, the Indenture Trustee will draw on amounts in the General
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Subaccount to pay expenses of the Trust and the Grantee and to pay interest and
make Scheduled Payments on the Notes and to make other payments and transfers in
accordance with the terms of the Indenture, including any amounts payable by the
Trust to a Swap Counterparty under the terms of a Swap Agreement.
RESERVE SUBACCOUNT. IFC Collections available with respect to any Payment
Date in excess of amounts necessary to make the Specified Payments will be
allocated to the Reserve Subaccount.
OVERCOLLATERALIZATION SUBACCOUNT. Each Transitional Funding Order will
provide that the Trust, as the assignee of the Intangible Transition Property
created thereby, is entitled to collect an additional amount (for any Series,
the "Overcollateralization Amount") specified in the related Prospectus
Supplement which is intended to enhance the likelihood that payments on the
Notes will be made in accordance with their Expected Amortization Schedules.
Each Transitional Funding Order will permit the Servicer to set the IFC Charges
at levels that are expected to produce IFC Collections in amounts that exceed
the amounts expected to be required to pay interest and make Scheduled Payments
on the Notes, and to pay all related fees and expenses of the Trust and the
Grantee, including the Servicing Fee and any Administration Fee, in order to
collect the Overcollateralization Amount. The Overcollateralization Amount
established in connection with each Series of Notes will be specified in the
related Prospectus Supplement, but will not be less than 0.50 percent of the
initial principal balance of such Series of Notes, and will be collected over
the expected life of the Notes of such Series (I.E., over the period from the
Series Issuance Date of the Notes of such Series through the latest Expected
Maturity Date for any Note in such Series). The Overcollateralization Amount for
all Series of Notes will be held in the Overcollateralization Subaccount. The
amount required to be on deposit in the Overcollateralization Subaccount as of
any Payment Date with respect to each Series, as specified in the schedule set
forth in the related Prospectus Supplement, is referred to herein as the
"Required Overcollateralization Level."
Amounts in the Overcollateralization Subaccount will be invested in Eligible
Investments, and the Trust will be entitled to earnings thereon, subject to the
limitations described under "--Allocations; Payments." Amounts in the
Overcollateralization Subaccount are intended to cover any shortfall in IFC
Collections that might otherwise occur on any Payment Date or at the last
Scheduled Maturity Date for any Series or Class of Notes. Any amounts remaining
in the Overcollateralization Subaccount with respect to a particular Series of
Notes in excess of the amounts required to pay such Series of Notes in full at
the Final Maturity Date will be paid to the Grantee or as it directs.
CAPITAL SUBACCOUNT. Upon the issuance of each Series of Notes, the Trust
will retain proceeds in an amount which will be at least equal to 0.50 percent
of the initial principal amount of such Series of Notes, less $100,000 in the
aggregate for all Series of Notes. Such amount (with respect to each Series, the
"Required Capital Level") will be deposited into the Capital Subaccount.
ALLOCATIONS; PAYMENTS
On each Payment Date, the Indenture Trustee will apply, at the direction of
the Servicer, all amounts on deposit in the Collection Account (including net
earnings thereon), as of the most recent Daily Remittance Date or Monthly
Remittance Date (as applicable) to pay the following amounts in the following
priority:
(a) all amounts owed by the Trust to the Delaware Trustee and the
Indenture Trustee will be paid to such persons;
(b) the Servicing Fee and all unpaid Servicing Fees from any prior
Payment Dates will be paid to the Servicer;
(c) the Administration Fee and all unpaid Administration Fees (or any
portions thereof), if any, from prior Payment Dates will be paid to the
Administrator;
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(d) so long as no Default or Event of Default has occurred or would be
caused by such payment, all other accrued and unpaid Operating Expenses will
be paid to the persons entitled thereto, provided that the amount paid on
each Payment Date pursuant to this clause (d) may not exceed $100,000;
(e) any overdue Quarterly Interest (together with, to the extent lawful,
interest on such overdue Quarterly Interest at the applicable Note Interest
Rate) and then Quarterly Interest with respect to each Series of Notes will
be paid to the Noteholders together with any net payment due to a Swap
Counterparty;
(f) principal on any Series of the Notes payable as a result of an Event
of Default or on the Final Maturity Date for such Series of Notes will be
paid to the Noteholders of the applicable Series;
(g) the Scheduled Payment for any Series of Notes based on priorities
described in each Prospectus Supplement will be paid to the Noteholders of
the applicable Series;
(h) unpaid Operating Expenses will be paid to the persons entitled
thereto;
(i) the amount, if any, by which the Required Capital Level with respect
to all outstanding Series of Notes exceeds the amount in the Capital
Subaccount as of such Payment Date will be allocated to the Capital
Subaccount;
(j) the amount, if any, by which the Required Overcollateralization
Level with respect to all outstanding Series of Notes exceeds the amount in
the Overcollateralization Subaccount as of such Payment Date will be
allocated to the Overcollateralization Subaccount;
(k) funds up to the net earnings on amounts in the Collection Account
for the prior quarter without cumulation will be released to the Trust;
(l) if any Series of Notes has been retired as of such Payment Date, the
excess of the amount in the Overcollateralization Subaccount over the
aggregate Required Overcollateralization Level with respect to all Series of
Notes remaining outstanding will be released to the Grantee;
(m) if any Series of Notes has been retired as of such Payment Date, the
excess of the amount in the Capital Subaccount over the aggregate Required
Capital Level with respect to all Series of Notes remaining outstanding will
be released to the Grantee;
(n) the balance, if any, will be allocated to the Reserve Subaccount for
payment on subsequent Payment Dates; and
(o) following the payment in full of all outstanding Series of Notes,
the balance, if any, will be released to the Trust.
If on any Payment Date funds on deposit in the General Subaccount are
insufficient to make the payments contemplated by clauses (a) through (g) above,
the Indenture Trustee will (x) first, draw from amounts on deposit in the
Reserve Subaccount, (y) second, draw from amounts on deposit in the
Overcollateralization Subaccount, and (z) third, draw from amounts on deposit in
the Capital Subaccount, up to the amount of such shortfall, in order to make
such payments in full. If amounts on deposit in the Capital Subaccount or the
Overcollateralization Subaccount are used to pay such amounts or make such
transfers, as the case may be, subsequent Adjustments shall take into account,
among other things, such amounts and on subsequent Payment Dates the Capital
Subaccount or the Overcollateralization Subaccount, as the case may be, will be
replenished to the extent IFC Collections exceed amounts required to pay amounts
having a higher priority of payment, as more fully described above. In addition,
if on any Payment Date funds on deposit in the General Subaccount are
insufficient to make the transfers described in clauses (i) and (j) above, the
Indenture Trustee will draw from amounts on deposit in the Reserve Subaccount to
make such transfers notwithstanding the fact that, on such Payment Date, the
allocation contemplated by clause (h) above may not have been fully satisfied.
If on any Payment Date when there is more than one Series of Notes outstanding,
funds on deposit in the Collection Account are insufficient to
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make the payments contemplated by clauses (e), (f) and (g) above, such funds
will be allocated among the various Series and Classes pro rata, as specified in
the related Prospectus Supplement.
For purposes of the foregoing allocations:
"Administration Fee" means the fee payable each month to Illinois Power (or
any successor Administrator) as the Administrator under the Administration
Agreement between Illinois Power and the Grantee.
"Quarterly Interest" means, with respect to any Payment Date and any Series
of Notes, the quarterly interest for such date and Series as specified in the
related Prospectus Supplement.
Payments to the Noteholders of a Series will be made to such holders as
specified in the related Prospectus Supplement.
STATE PLEDGE
The Funding Law provides: "The State [of Illinois] pledges to and agrees
with the holders of any transitional funding instruments who may enter into
contracts with an electric utility, grantee, assignee or issuer pursuant to this
Article XVIII [I.E., the Funding Law] that the State will not in any way limit,
alter, impair or reduce the value of intangible transition property created by,
or instrument funding charges approved by, a transitional funding order so as to
impair the terms of any contract made by such electric utility, grantee,
assignee or issuer with such holders or in any way impair the rights and
remedies of such holders until the pertinent grantee instruments or, if the
related transitional funding order does not provide for the issuance of grantee
instruments, the pertinent transitional funding instruments and interest,
premium and other fees, costs and charges related thereto, as the case may be,
are fully paid and discharged. Electric utilities, grantees and issuers are
authorized to include these pledges and agreements of the State in any contract
with the holders of transitional funding instruments or with any assignees
pursuant to this Article XVIII [of the Funding Law] and any assignees are
similarly authorized to include these pledges and agreements of the State in any
contract with any issuer, holder or any other assignee. Nothing in this Article
XVIII [of the Funding Law] shall preclude the State of Illinois from requiring
adjustments as may otherwise be allowed by law to the electric utility's base
rates, transition charges, delivery services charges, or other charges for
tariffed services, so long as any such adjustment does not directly affect or
impair any instrument funding charges previously authorized by a transitional
funding order issued by the [ICC]."
Each Transitional Funding Order will provide that the Noteholders and the
Indenture Trustee for the benefit of the Noteholders shall be entitled to the
benefit of the pledges and agreements of the State of Illinois set forth in
Section 18-105(b) of the Funding Law and that each of Illinois Power, the
Grantee and the Trust is authorized to include such pledges and agreements in
any contract with the Noteholders, the Indenture Trustee or with any assignees
pursuant to Section 18-105(b) of the Funding Law. The Grantee will include these
pledges and agreements of the State of Illinois in each Sale Agreement to the
Trust and the Trust, in turn, has included these pledges and agreements in the
Indenture for the benefit of the Indenture Trustee and Noteholders.
REPORTS TO NOTEHOLDERS
On or prior to each Payment Date, Special Payment Date or any other date
specified in the Indenture for payments with respect to any Class of Notes, the
Indenture Trustee will deliver to the Noteholders of such Class a statement with
respect to such payment to be made on such Payment Date, Special Payment Date or
other date, as the case may be, setting forth the following information:
(a) the amount of the payment to Noteholders allocable to (i) principal
and (ii) interest;
(b) the aggregate outstanding principal balance of the Notes, after
giving effect to payments allocated to principal reported under (a) above;
and
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(c) the difference, if any, between the amount specified in (b) above
and the principal amount scheduled to be outstanding on such date according
to the Expected Amortization Schedule.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of the Notes, the Indenture Trustee
will mail to each person who at any time during such calendar year has been a
Noteholder and received any payment thereon, a statement containing material
information for the purposes of such Noteholder's preparation of Federal and
state income tax returns. See "Material United States Federal Tax Consequences."
SUPPLEMENTAL INDENTURES
The Trust and the Indenture Trustee may, from time to time, and without the
consent of the Noteholders of any Series (but with prior notice to the Rating
Agencies), enter into one or more agreements supplemental to the Indenture for
various purposes described in the Indenture, including (1) to add to the
covenants for the benefit of the Noteholders; (2) to cure any ambiguity or
correct or supplement any provision in the Indenture or in any supplemental
indenture which may be inconsistent with any other provision in the Indenture or
in any supplemental indenture or to make any other provisions with respect to
matters or questions arising under the Indenture; provided that any such action
shall not adversely affect the interests of the Noteholders; (3) to evidence the
succession of another person to the role of the Indenture Trustee in accordance
with the terms of the Indenture; (4) to effect qualification under the Trust
Indenture Act of 1939, as amended; or (5) to set forth the terms of any
additional Series of Notes or to provide for the terms of any Swap Agreement.
The Trust and the Indenture Trustee may also, without the consent of the
Noteholders, enter into one or more other agreements supplemental to the
Indenture so long as such supplemental agreement does not, as evidenced by an
opinion of counsel, adversely affect the interests of any Noteholders in any
material respect and the Rating Agency Condition shall have been satisfied with
respect thereto.
In addition, the Trust and the Indenture Trustee may, with the consent of
Noteholders holding not less than a majority of the aggregate outstanding
principal amount of the Notes of all affected Series or Classes, enter into one
or more indentures supplemental to the Indenture for the purpose of, among other
things, adding any provisions to or changing in any manner or eliminating any of
the provisions of the Indenture. No such supplement, however, may, without the
consent of each Noteholder of each Series or Class affected thereby, take
certain actions enumerated in the Indenture, including (a) reduce in any manner
the amount of, or delay the timing of, deposits or payments on any Note, (b)
reduce the aforesaid percentage of the aggregate outstanding principal amount of
the Notes the holders of which are required to consent to any such supplement,
(c) modify the provisions in the Indenture relating to amendments with the
consent of Noteholders to decrease any minimum percentage of Noteholders
required to approve such amendments, (d) permit the creation of any lien on the
Note Collateral ranking prior to or on a parity with the lien of the Indenture,
or (e) cause any material adverse federal income tax consequences to Illinois
Power, the Grantee, the Trust, the Delaware Trustee, the Indenture Trustee or
the then existing Noteholders. Promptly following the execution of any such
supplement to the Indenture, the Indenture Trustee will furnish written notice
of the substance of such amendment to each Noteholder.
Any supplement to the Indenture or Trust issuance certificate executed in
connection with the issuance of one or more additional Series of Notes will not
be considered an amendment to the Indenture.
CERTAIN COVENANTS OF THE DELAWARE TRUSTEE AND THE TRUST
The Trust may not consolidate with or merge into, or convert into, any other
entity, unless (a) the entity formed by or surviving such consolidation or
merger or conversion is organized under the laws of the United States, any state
thereof or the District of Columbia, (b) such entity expressly assumes by an
indenture supplemental to the Indenture the performance or observance of every
agreement and covenant of the Trust under the Indenture, (c) no Default (as
defined in the Indenture) or Event of Default will have occurred and be
continuing immediately after such merger or consolidation or conversion, (d) the
Rating Agency Condition will have been satisfied with respect to such
transaction, (e) Illinois Power shall have
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delivered to the Grantee, the Trust, the Delaware Trustee and the Indenture
Trustee an opinion of independent tax counsel (as selected by, and in form and
substance reasonably satisfactory to, Illinois Power, and which may be based on
a ruling from the IRS) to the effect that, for federal income tax purposes, such
consolidation or merger or conversion will not result in an adverse federal
income tax consequence to Illinois Power, the Grantee, the Trust, the Delaware
Trustee, the Indenture Trustee or the then existing Noteholders, (f) the Trust
shall have delivered to the Indenture Trustee an officer's certificate and an
opinion of counsel, each stating that all conditions precedent therein in the
Indenture provided for relating to such transaction have been complied with and
(g) any action as is necessary to maintain the lien and security interest
created by the Indenture and the Funding Law will have been taken.
The Trust may not sell, convey, exchange or transfer or otherwise dispose of
any of the properties or assets of the Trust to any person or entity, unless (a)
the person or entity acquiring the properties and assets (i) is a United States
citizen or an entity organized under the laws of the United States, any state
thereof or the District of Columbia, (ii) expressly assumes by an indenture
supplemental to the Indenture the performance or observance of every agreement
and covenant of the Trust under the Notes, (iii) expressly agrees by such
supplemental indenture that all right, title and interest so conveyed or
transferred will be subject and subordinate to the rights of Noteholders, (iv)
unless otherwise specified in the supplemental indenture referred to in clause
(ii) above, expressly agrees to indemnify, defend and hold harmless the Delaware
Trustee against and from any loss, liability or expense arising under or related
to the Indenture and the Notes, and (v) expressly agrees by means of such
supplemental indenture that such person (or if a group of persons, then one
specified person) shall make all filings with the Commission (and any other
appropriate person) required by the Exchange Act in connection with the Notes,
(b) no Event of Default will have occurred and be continuing immediately after
such transaction, (c) the Rating Agency Condition will have been satisfied with
respect to such transaction, (d) Illinois Power shall have delivered to the
Grantee, the Trust, the Delaware Trustee and the Indenture Trustee an opinion of
independent tax counsel (as selected by, and in form and substance reasonably
satisfactory to, Illinois Power, and which may be based on a ruling from the
IRS) to the effect that such disposition will not result in a material adverse
federal income tax consequence to Illinois Power, the Grantee, the Trust, the
Delaware Trustee, the Indenture Trustee or the then existing Noteholders, (e)
the Trust shall have delivered to the Indenture Trustee an officer's certificate
and an opinion of counsel, each stating that such conveyance or transfer
complies with the Indenture and all conditions precedent therein provided for
relating to such transaction have been complied with and (f) any action as is
necessary to maintain the lien and security interest created by the Indenture
shall have been taken.
The Trust will not, among other things, for so long as any Notes are
outstanding (a) except as expressly permitted by the Indenture, sell, transfer,
exchange or otherwise dispose of any of the assets of the Trust, unless directed
to do so by the Indenture Trustee, (b) claim any credit on, or make any
deduction from the principal or interest payable in respect of, the Notes (other
than amounts properly withheld under the Code) or assert any claim against any
present or former Noteholder because of the payment of taxes levied or assessed
upon any part of the Intangible Transition Property and the other Note
Collateral, (c) terminate the existence of, or dissolve or liquidate in whole or
in part, the Trust, (d) permit the validity or effectiveness of the Notes to be
impaired, (e) permit the lien of the Indenture to be amended, hypothecated,
subordinated, terminated or discharged or permit any person to be released from
any covenants or obligations with respect to the Notes except as may be
expressly permitted by the Indenture, (f) permit any lien, charge, excise,
claim, security interest, mortgage or other encumbrance, other than the lien and
security interest granted under the Indenture, to be created on or extend to or
otherwise arise upon or burden the Note Collateral or any part thereof or any
interest therein or the proceeds thereof (other than tax liens arising by
operation of law with respect to amounts not yet due) or (g) permit the lien
granted under the Indenture not to constitute a valid first priority security
interest in the Note Collateral.
The Trust may not engage in any business other than financing, purchasing,
owning and managing the Intangible Transition Property and the other Note
Collateral and the issuance of the Notes in the manner contemplated by the
Notes, the Sale Agreements, the Servicing Agreement, the Trust Agreement, the
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Grant Agreements, or certain related documents (collectively, the "Basic
Documents") and activities incidental thereto.
The Trust will not issue, incur, assume, guarantee or otherwise become
liable for any indebtedness except for the Notes.
The Trust will not, except as contemplated by the Basic Documents, make any
loan or advance or credit to, or guarantee, endorse or otherwise become
contingently liable in connection with the obligations, stocks or dividends of,
or own, purchase, repurchase or acquire (or agree contingently to do so) any
stock, obligations, assets or securities of, or any other interest in, or make
any capital contribution to, any other person. The Trust will not, except as
contemplated by the Basic Documents, make any expenditure (by long-term or
operating lease or otherwise) for capital assets (either realty or personalty).
The Trust will not, directly or indirectly, make payments to or distributions
from the Collection Account except in accordance with the Basic Documents.
The Trust will not make any payments, distributions or dividends to any
holder of beneficial interests in the Trust in respect of such beneficial
interest for any calendar month unless no Event of Default shall have occurred
and be continuing and any such payments do not cause the book value of the
remaining equity in the Trust to decline below 0.50% of the initial principal
amount of all Series of Notes issued and outstanding pursuant to the Indenture.
The Trust will cause the Servicer to deliver to the Indenture Trustee the
annual accountant's certificates, compliance certificates, reports regarding
distributions and statements to Noteholders required by the Servicing Agreement.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT
An "Event of Default" with respect to any Series of Notes is defined in the
Indenture as being: (a) a default for five days in the payment of any interest
on any Note; (b) a default in the payment of the then unpaid principal of any
Note on the Final Maturity Date for such Series; (c) a default in the payment of
the optional redemption price for any Note on the optional redemption date
therefor; (d) a default in the observance or performance of any covenant or
agreement of the Trust made in the Indenture (other than a default under clauses
(a) through (c) above) and the continuation of any such default for a period of
30 days after written notice thereof is given to the Trust by the Indenture
Trustee or to the Trust and the Indenture Trustee by the holders of at least 25
percent in principal amount of the Notes of such Series then outstanding; (e)
any representation or warranty made by the Delaware Trustee in the Indenture on
behalf of the Trust or in any certificate delivered pursuant thereto or in
connection therewith having been incorrect in a material respect as of the time
made, and such breach not having been cured within 30 days after written notice
thereof is given to the Trust by the Indenture Trustee or to the Trust and the
Indenture Trustee by the holders of at least 25 percent in principal amount of
the Notes of such Series then outstanding; (f) certain events of bankruptcy,
insolvency, receivership or liquidation of the Trust; (g) a breach by the State
of Illinois or any of its agencies (including the ICC), officers or employees of
the State Pledge; or (h) any other event designated as such in a Trust issuance
certificate or series supplement relating to such Series.
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If an Event of Default (other than as specified in clause (g) above) should
occur and be continuing with respect to any Series of Notes, the Indenture
Trustee or holders of not less than a majority in principal amount of the Notes
of all Series then outstanding may declare the principal of the Notes of all
Series to be immediately due and payable. Such declaration may, under certain
circumstances set forth in the Indenture, be rescinded by the holders of a
majority in principal amount of the Notes of all Series then outstanding. If an
Event of Default as specified in clause (g) above has occurred, the Servicer
shall be obligated to institute (and the Indenture Trustee, for the benefit of
the Noteholders, shall be entitled and empowered to institute) any suits,
actions or proceedings at law, in equity or otherwise, to enforce the State
Pledge and to collect any monetary damages as a result of a breach thereof, and
each of the Servicer and the Indenture Trustee may prosecute any such suit,
action or proceeding to final judgment or decree. The Servicer would be required
to advance its own funds in order to bring any such suits, actions or
proceedings and, for so long as such legal actions were pending, the Servicer
would, unless otherwise prohibited by applicable law or court or regulatory
order in effect at such time, be required to bill and collect the IFC Charges,
perform Adjustments and discharge its obligations under the Servicing Agreement.
The Servicer would be entitled to reimbursement of its expenses advanced by it
in connection with such legal or administrative action as an operating expense
of the Trust under the Indenture.
If the Notes of all Series have been declared to be due and payable
following an Event of Default, the Indenture Trustee may, in its discretion,
either sell the Intangible Transition Property or elect to have the Trust
maintain possession of the Intangible Transition Property and continue to apply
IFC Collections as if there had been no declaration of acceleration. There is
likely to be a limited market, if any, for the Intangible Transition Property
following a foreclosure thereon, in light of the preceding default, the unique
nature of the Intangible Transition Property as an asset and other factors
discussed herein. In addition, the Indenture Trustee is prohibited from selling
the Intangible Transition Property following an Event of Default with respect to
any Series, other than a default in the payment of any principal or redemption
price or a default for five days or more in the payment of any interest on any
Note of any Series unless (a) the holders of all the outstanding Notes of all
Series consent to such sale, (b) the proceeds of such sale are sufficient to pay
in full the principal of and the accrued interest on the outstanding Notes of
all Series or (c) the Indenture Trustee determines that the proceeds of the Note
Collateral would not be sufficient on an ongoing basis to make all payments on
the Notes of all Series as such payments would have become due if the Notes had
not been declared due and payable, and the Indenture Trustee obtains the consent
of the holders of 66 2/3 percent of the aggregate outstanding amount of the
Notes of all Series.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, if an Event of Default occurs and is continuing, the
Indenture Trustee will be under no obligation to exercise any of the rights or
powers under the Notes at the request or direction of any of the holders of
Notes of any Series if the Indenture Trustee reasonably believes it will not be
adequately indemnified against the costs, expenses and liabilities which might
be incurred by it in complying with such request. Subject to such provisions for
indemnification and certain limitations contained in the Indenture, the holders
of not less than a majority in principal amount of the outstanding Notes of all
Series (or, if less than all Series or Classes are affected, the affected
Series, Class or Classes) will have the right to direct the time, method and
place of conducting any proceeding or any remedy available to the Indenture
Trustee and the holders of a majority in principal amount of the Notes of all
Series then outstanding may, in certain cases, waive any default with respect
thereto, except a default in the payment of principal or interest or a default
in respect of a covenant or provision of the Indenture that cannot be modified
without the waiver or consent of all of the holders of the outstanding Notes of
all Series or Classes affected thereby.
With respect to the Notes, no holder of any Note of any Series will have the
right to institute any proceeding with respect to the Notes, unless (a) such
holder previously has given to the Indenture Trustee written notice of a
continuing Event of Default with respect to such Series, (b) the holders of not
less than 25 percent in principal amount of the outstanding Notes of all Series
have made written request of the Indenture Trustee to institute such proceeding
in its own name as Indenture Trustee, (c) such holder or
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holders have offered the Indenture Trustee satisfactory indemnity, (d) the
Indenture Trustee has for 60 days failed to institute such proceeding and (e) no
direction inconsistent with such written request has been given to the Indenture
Trustee during such 60-day period by the holders of a majority in principal
amount of the outstanding Notes of all Series.
In addition, each of the Indenture Trustee, the Noteholders and the Servicer
will covenant that it will not prior to the date which is one year and one day
after the termination of the Indenture, institute against the Grantee, the Trust
or the Delaware Trustee any bankruptcy, reorganization or other proceeding under
any federal or state bankruptcy or similar law, subject to the right of the ICC
to order sequestration and payment of revenues arising with respect to the
Intangible Transition Property.
Neither the Delaware Trustee in its individual capacity nor the Indenture
Trustee in its individual capacity, nor any holder of any ownership interest in
the Trust, nor any of their respective owners, beneficiaries, agents, officers,
directors, employees, successors or assigns will, in the absence of an express
agreement to the contrary, be personally liable for the payment of the principal
of or interest on the Notes of any Series or for the agreements of the Trust
contained in the Indenture.
ACTIONS BY NOTEHOLDERS
Subject to certain exceptions, the holders of a majority of the aggregate
outstanding amount of the Notes of all Series (or, if less than all Series or
Classes are affected, the affected Series or Class or Classes) shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Indenture Trustee, or exercising any trust or power
conferred on the Indenture Trustee under the Indenture; provided that: (1) such
direction shall not be in conflict with any rule of law or with the Indenture
and would not involve the Indenture Trustee in personal liability or expense;
(2) the Indenture Trustee shall not have determined that the action might
materially adversely affect the rights of any Noteholder not consenting to such
actions; (3) the Indenture Trustee may take any other action deemed proper by
the Indenture Trustee which is not inconsistent with such direction. In
circumstances under which the Indenture Trustee is required to seek instructions
from the holders of the Notes of any Class with respect to any such action or
vote, the Indenture Trustee will take such action or vote for or against any
proposal in proportion to the principal amount of the corresponding Class, as
applicable, of Notes taking the corresponding position. Notwithstanding the
foregoing, each Noteholder shall be allowed to institute suit for the
non-payment of (a) the interest, if any, on its Notes which remains unpaid as of
the applicable due date and (b) the unpaid principal, if any, of such Notes on
the Final Maturity Date therefor.
ANNUAL COMPLIANCE STATEMENT
The Trust will be required to file annually with the Indenture Trustee and
the Rating Agencies a written statement as to the fulfillment of its obligations
under the Notes.
MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES
The following discussion is a summary of material United States federal
income and estate tax consequences relevant to the purchase, ownership and
disposition of the Notes by the beneficial owners thereof ("Noteholders"). The
discussion is limited to Noteholders and, except as specifically addressed
herein, does not address the tax consequences to subsequent purchasers of Notes.
This summary does not purport to be a complete analysis of all the potential
United States federal income and estate tax effects relating to the purchase,
ownership and disposition of the Notes. There can be no assurance that the
Internal Revenue Service (the "IRS") will take a similar view of such
consequences. Further, the discussion does not address all aspects of taxation
that might be relevant to particular purchasers in light of their individual
circumstances (including the effect of any state, local, non-United States or
other tax laws) or to certain types of purchasers (including dealers in
securities, insurance companies, financial institutions and tax-exempt entities)
subject to special treatment under United States federal tax law.
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The discussion below is based on the Internal Revenue Code of 1986, as
amended (the "Code"), administrative pronouncements, judicial decisions,
existing, proposed and temporary United States Treasury Regulations, all in
effect as of the date hereof, all of which are subject to change at any time,
and any such change may be applied retroactively. The discussion below assumes
that the Notes are held as capital assets within the meaning of Section 1221 of
the Code.
IT IS RECOMMENDED THAT PERSONS CONSIDERING THE PURCHASE OF NOTES SHOULD
CONSULT THEIR TAX ADVISORS WITH REGARD TO THE APPLICATION OF THE UNITED STATES
FEDERAL INCOME AND ESTATE TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY
TAX CONSEQUENCES TO THEM ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR
NON-UNITED STATES TAXING JURISDICTION.
With respect to each Series of Notes, Illinois Power expects to receive a
ruling from the IRS to the effect that, among other things, (a) the Trust's
issuance of the Notes will not result in gross income to Illinois Power and (b)
the Notes will be obligations of Illinois Power. Illinois Power has received
such a ruling with respect to the Notes to be issued in accordance with the
Initial TFO. For a given Series of Notes, however, Illinois Power may decide
that, in lieu of obtaining a ruling from the IRS, Illinois Power will rely on an
opinion from its tax counsel to the effect that, among other things, the Notes
will be obligations of Illinois Power. The IRS ruling or the tax opinion will be
discussed in the related Prospectus Supplement. The following discussion assumes
that, based on such ruling or tax opinion, the Notes will constitute
indebtedness of Illinois Power for federal income and estate tax purposes.
The discussions below under "Tax Consequences to United States Noteholders,"
"Tax Consequences to Non-United States Noteholders" and "Backup Withholding and
Information Reporting" are accurate in all material respects as to matters of
law and legal conclusions and, to the extent such discussions constitute matters
of law or legal conclusions, they are based on the opinion of Mayer, Brown &
Platt.
TAX CONSEQUENCES TO UNITED STATES NOTEHOLDERS
UNITED STATES NOTEHOLDER. As used herein, the term "United States
Noteholder" means a Noteholder who or which is, for United States federal income
tax purposes, (a) a citizen or resident of the United States, (b) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or of any state thereof (including the District of Columbia), (c)
an estate the income of which is subject to United States federal income
taxation regardless of its source, or (d) a trust described in Section
7701(a)(30) of the Code (taking into account changes thereto and associated
effective dates, elections and transition rules). The term also includes certain
Noteholders who are former citizens or residents of the United States whose
income and gain from the Notes will be subject to United States taxation.
PAYMENTS OF INTEREST. Interest paid on a Note will generally be taxable to
a United States Noteholder as ordinary interest income at the time it accrues or
is received in accordance with the United States Noteholder's method of
accounting for United States federal income tax purposes. The preceding sentence
assumes that, in the case of Floating Rate Notes, the Floating Rate Notes will
qualify as "variable rate debt instruments" as defined in Treasury Regulation
Section1.1275-5(a) and that interest on such Floating Rate Notes will be
unconditionally payable, or will be constructively received under Section 451 of
the Code, in cash or in property at least annually at a single "qualified
floating rate" or "objective rate". If such assumption is incorrect with respect
to a Floating Rate Note, the taxation of interest on such Floating Rate Note
will be addressed in the related Prospectus Supplement.
ORIGINAL ISSUE DISCOUNT. Because it is expected that the stated principal
amount of the Notes will not exceed their issue price by more than a statutory
DE MINIMIS amount (I.E., 0.25% of the principal amount of a Note multiplied by
its weighted average maturity), the Notes should not be issued with "original
issue discount." If the stated principal amount of a Note exceeds its issue
price by an amount that is less than or equal to such DE MINIMIS amount, the
excess generally will be taken into income by a United States Noteholder as gain
from the retirement of a Note (as described below under "--Sale, Exchanges,
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Redemption or Retirement of the Notes"), in proportion to principal payments
made on the Notes. A United States Noteholder may elect to treat all interest on
a Note as original issue discount. If such an election is made, the excess of a
Note's stated principal amount over its issue price would not be treated as DE
MINIMIS and would be taken into income on a constant yield basis under the rules
applicable to accrual of original issue discount.
MARKET DISCOUNT AND PREMIUM. A Noteholder attempting to sell a Note in the
secondary market should be aware that a subsequent Noteholder who purchases a
Note at a discount might be subject to the "market discount" rules of the Code.
Also, a subsequent Noteholder who purchases a Note at a premium may elect to
amortize and deduct the premium over the remaining term of the Note in
accordance with rules set forth in Section 171 of the Code.
SALE, EXCHANGES, REDEMPTION OR RETIREMENT OF THE NOTES. Upon the sale,
exchange, redemption or retirement of a Note, a United States Noteholder will
recognize taxable gain or loss equal to the difference between the amount
realized on such sale, exchange, redemption or retirement (not including any
amount attributable to accrued but unpaid interest) and such Noteholder's
adjusted tax basis in the Note. To the extent the amount realized is
attributable to accrued but unpaid interest, the amount recognized by the United
States Noteholder will be treated as a payment of interest. See "--Payments of
Interest" above. A United States Noteholder's adjusted tax basis in a Note
generally will equal the cost of the Note to such Noteholder, increased by any
OID previously included by such Noteholder in income with respect to such Note
and reduced by any principal payments received by such Noteholder.
Gain or loss recognized on the sale, exchange, redemption or retirement of a
Note will be capital gain or loss. For non-corporate taxpayers, capital gain
recognized on the disposition of an asset (including a Note) held for more than
one year is subject to United States federal income tax at a maximum rate of
20%. Recently enacted legislation eliminated the long-term capital gain tax rate
differential between capital assets held for more than 18 months and capital
assets held for more than one year but not more than 18 months. Capital gain on
the disposition of an asset (including a Note) held for not more than one year
is taxed at the rates applicable to ordinary income (I.E., up to 39.6%). The
distinction between capital gain or loss and ordinary income or loss is relevant
for purposes of, among other things, limitations on the deductibility of capital
losses.
TAX CONSEQUENCES TO NON-UNITED STATES NOTEHOLDERS
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(a) payments of principal and interest (including original issue
discount, if any) on a Note by the Trust or any paying agent to a Noteholder
that is not a United States Noteholder, as defined above (hereinafter,
"Non-United States Noteholder"), will not be subject to withholding of
United States federal income tax, provided that, in the case of interest,
(i) such Noteholder does not own, actually or constructively, 10 percent or
more of the total combined voting power of all classes of stock of Illinois
Power entitled to vote, (ii) such Noteholder is not, for United States
federal income tax purposes, a controlled foreign corporation related,
directly or indirectly, to Illinois Power through stock ownership, (iii)
such Noteholder is not a bank receiving interest described in Section
881(c)(3)(A) of the Code, and (iv) the certification requirements under
Section 871(h) or Section 881(c) of the Code and Treasury Regulations
thereunder (summarized below) are met;
(b) a Non-United States Noteholder will not be subject to United States
federal income tax on gain recognized on the sale, exchange, redemption,
retirement or other disposition of such Note, unless (i) such Noteholder is
a non-resident alien individual who is present in the United States for 183
days or more in the taxable year of disposition, and certain conditions are
met or (ii) such gain is effectively connected with the conduct by such
Noteholder of a trade or business in the United States; and
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(c) a Note held by an individual who is not a citizen or resident (as
defined for United States federal estate tax purposes) of the United States
at the time of his death will not be subject to United States federal estate
tax as a result of such individual's death, provided that, at the time of
such individual's death, (i) the individual does not own, actually or
constructively, 10 percent or more of the total combined voting power of all
classes of stock of Illinois Power entitled to vote and (ii) payments with
respect to such Note, if received at the time of the individual's death,
would not have been effectively connected with the conduct by such
individual of a trade or business in the United States.
Sections 871(h) and 881(c) of the Code and United States Treasury
Regulations thereunder require that, in order to obtain the exemption from
withholding tax described in paragraph (a) above, either (A) the beneficial
owner of a Note must certify, under penalties of perjury, to the Trust or paying
agent, as the case may be, that such owner is a Non-United States Noteholder and
must provide such owner's name and address, or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution") and holds the Note on behalf of the beneficial owner thereof must
certify, under penalties of perjury, to the Trust or paying agent, as the case
may be, that such certificate has been received from the beneficial owner by it
or by a Financial Institution between it and the beneficial owner and must
furnish the payor with a copy thereof. A certificate described in this paragraph
is effective only with respect to payments of interest made to the certifying
Non-United States Noteholder after issuance of the certificate in the calendar
year of its issuance and the two immediately succeeding calendar years. Under
temporary United States Treasury Regulations, the foregoing certification may be
provided by the beneficial owner of a Note on IRS Form W-8.
Notwithstanding the foregoing, interest described in Section 871(h)(4) of
the Code is subject to United States withholding tax at a 30% rate (or such
lower rate as may be provided by an applicable treaty). In general, interest
described in Section 871(h)(4) of the Code includes (subject to certain
exceptions) any interest, the amount of which is determined by reference to
receipts, sales or other cash flow of the issuer or a related person, any income
or profits of the issuer or a related person, any change in the value of any
property of the issuer or a related person or any dividends, partnership
distribution or similar payments made by the issuer or a related person.
Interest described in Section 871(h)(4) of the Code may include other types of
contingent interest identified by the IRS in future Treasury Regulations. The
Trust does not currently expect to issue Notes, the interest on which is
described in Section 871(h)(4) of the Code. However, if such Notes are issued,
the taxation of such Notes will be addressed in the related Prospectus
Supplement.
On October 14, 1997, the IRS published in the Federal Register final
Regulations (the "1997 Final Regulations") which affect the United States
taxation of Non-United States Noteholders. As promulgated, the 1997 Final
Regulations will be effective for payments after December 31, 1998, regardless
of the issue date of the instrument with respect to which such payments are
made, subject to certain transition rules. The IRS thereafter announced its
intention to amend the 1997 Final Regulations to extend this date to December
31, 1999, subject to certain transition rules. The discussion under this heading
and under "--Backup Withholding and Information Reporting," below, is not
intended to be a complete discussion of the provisions of the 1997 Final
Regulations or the subsequent IRS announcement, and it is recommended that
prospective purchasers of the Notes to consult their tax advisors concerning the
tax consequences of their acquiring, holding and disposing of the Notes in light
of the 1997 Final Regulations.
The 1997 Final Regulations provide documentation procedures designed to
simplify compliance by withholding agents. The 1997 Final Regulations generally
do not affect the documentation rules described above, but add other
certification options. Under one such option, a withholding agent will be
allowed to rely on an intermediary withholding certificate furnished by a
"qualified intermediary" (as defined below) on behalf of one or more beneficial
owners (or other intermediaries) without having to obtain the beneficial owner
certificate described above. "Qualified Intermediaries" include: (a) foreign
financial institutions or foreign clearing organizations (other than a United
States branch or United States office of
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such institution or organization) or (b) foreign branches or offices of United
States financial institutions or foreign branches or offices of United States
clearing organizations, which, as to both (a) and (b), have entered into
withholding agreements with the IRS. In addition to certain other requirements,
qualified intermediaries must obtain withholding certificates, such as revised
IRS Form W-8 (see below), from each beneficial owner. Under another option, an
authorized foreign agent of a United States withholding agent will be permitted
to act on behalf of the United States withholding agent, provided certain
conditions are met.
For purposes of the certification requirements, the 1997 Final Regulations
generally treat, as the beneficial owners of payments on a Note, those persons
that, under United States tax principles, are the taxpayers with respect to such
payments, rather than persons such as nominees or agents legally entitled to
such payments. In the case of payments to an entity classified as a foreign
partnership under United States tax principles, the partners, rather than the
partnership, generally will be required to provide the required certifications
to qualify for the withholding exemption described above. A payment to a United
States partnership, however, is treated for these purposes as payment to a
United States payee, even if the partnership has one or more foreign partners.
The 1997 Final Regulations provide certain presumptions with respect to
withholding for Noteholders not furnishing the required certifications to
qualify for the withholding exemption described above. In addition, the 1997
Final Regulations will replace a number of current tax certification forms
(including IRS Form W-8 and IRS Form 4224, discussed below) with a single,
revised IRS Form W-8 (which, in certain circumstances, requires information in
addition to that previously required). Under the 1997 Final Regulations, this
Form W-8 will remain valid, generally, until the last day of the third calendar
year following the year in which the certificate is signed. The 1997 Final
Regulations contained detailed rules, which might be changed in light of the
recent IRS announcement that the effective date will be postponed, governing tax
certifications during the transition period prior to and immediately following
the effectiveness of the 1997 Final Regulations.
If a Non-United States Noteholder is engaged in a trade or business in the
United States, and if interest on the Note, or gain recognized on the sale,
exchange, redemption, retirement or other disposition of a Note, is effectively
connected with the conduct of such trade or business, the Non-United States
Noteholder, although exempt from withholding of United States income tax, will
generally be subject to regular United States income tax on such interest or
gain in the same manner as if it were a United States Noteholder. See "--Tax
Consequences to United States Noteholders" above. In lieu of the certificate
described above, such a Noteholder must provide to the withholding agent a
properly executed IRS Form 4224 (or successor form) in order to claim an
exemption from withholding. In addition, if such Non-United States Noteholder is
a foreign corporation, it may be subject to a branch profits tax equal to 30%
(or such lower rate provided by an applicable treaty) of its effectively
connected earnings and profits for the taxable year, subject to certain
adjustments. For purposes of the branch profits tax, interest on, and any gain
recognized on the sale, exchange, redemption, retirement or other disposition
of, a Note will be included in the effectively connected earnings and profits of
such Non-United States Noteholder if such interest or gain is effectively
connected with the conduct by the Non-United States Noteholder of a trade or
business in the United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under current United States federal income tax law, a 31 % backup
withholding tax and information reporting requirements apply to certain payments
of principal and interest made to, and to the proceeds of sale before maturity
by, certain Noteholders.
In the case of a non-corporate United States Noteholder, backup withholding
will apply only if (a) such Noteholder fails to furnish its Taxpayer
Identification Number ("TIN") (which, for an individual, is his or her Social
Security number) to the payor in the manner required, (b) such Noteholder
furnishes an incorrect TIN and the payor is so notified by the IRS, (c) the
payor is notified by the IRS that such
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Noteholder has failed properly to report payments of interest or dividends or
(d) under certain circumstances, such Noteholder fails to certify, under
penalties of perjury, that it has furnished a correct TIN and has not been
notified by the IRS that it is subject to backup withholding for failure to
report interest or dividend payments. Backup withholding does not apply with
respect to payments made to certain exempt recipients, such as a corporation
(within the meaning of Section 7701(a) of the Code) and tax-exempt
organizations. United States Noteholders should consult their tax advisors
regarding their qualification for exemption from backup withholding and the
procedure for obtaining such an exemption if applicable.
The amount of any backup withholding from a payment to a United States
Noteholder will be allowed as a credit against such Noteholder's United States
federal income tax liability and may entitle such Noteholder to a refund,
provided that the required information is furnished to the IRS.
In the case of a Non-United States Noteholder, under currently applicable
United States Treasury Regulations, backup withholding and information reporting
will not apply to payments of principal or interest made by the Trust or any
paying agent thereof on a Note (absent actual knowledge that the Noteholder is a
United States Noteholder) if such Noteholder has provided the required
certification under penalties of perjury that it is not a United States
Noteholder (as defined above) or has otherwise established an exemption. If such
Noteholder does not provide the required certification, such Noteholder may
nevertheless avoid backup withholding or information reporting in the
circumstances described below, but might be subject to withholding of United
States federal income tax as described above under "--Tax Consequences to
Non-United States Noteholders."
Under currently applicable United States Treasury Regulations, if payments
of principal or interest are collected outside the United States by a foreign
office of a custodian, nominee or other agent acting on behalf of a beneficial
owner of a Note, such custodian, nominee or other agent will not be required to
apply backup withholding to such payments made to such beneficial owner, and
generally will not be subject to information reporting requirements. However, if
such custodian, nominee or other agent is a United States person, a controlled
foreign corporation for United States tax purposes or a foreign person 50% or
more of whose gross income is effectively connected with a United States trade
or business for a specified three-year period, information reporting (but not
backup withholding) will be required unless such custodian, nominee or other
agent has in its records documentary evidence that the beneficial owner is not a
United States Noteholder (which such agent does not actually know to be false)
and certain other conditions are met or the beneficial owner otherwise
establishes an exemption.
Under currently applicable United States Treasury Regulations, payments on
the sale, exchange, redemption, retirement or other disposition of a Note made
to or through a foreign office of a broker generally will not be subject to
backup withholding, and generally will not be subject to information reporting
requirements. Such payments, however, will be subject to information reporting
(but not backup withholding) if the broker is, for United States federal income
tax purposes, a United States person, a controlled foreign corporation or a
foreign person 50% or more of whose gross income is effectively connected with a
United States trade or business for a specified three-year period, unless the
broker has in its records documentary evidence that the beneficial owner is not
a United States Noteholder (which such broker does not actually know to be
false) and certain other conditions are met or the beneficial owner otherwise
establishes an exemption. Payments made to or through the United States office
of a broker will be subject to backup withholding and information reporting
unless the Non-United States Noteholder certifies, under penalties of perjury,
that it is not a United States person or otherwise establishes an exemption.
In general, the 1997 Final Regulations do not significantly alter the
substantive backup withholding and information reporting requirements described
above. As under current law, backup withholding and information reporting will
not apply to (i) payments to a Non-United States Noteholder of principal and
interest and (ii) payments to a Non-United States Noteholder on the sale,
exchange, redemption, retirement or other disposition of a Note, in each case if
such Non-United States Noteholder provides the
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required certification to establish an exemption from the withholding of United
States federal income tax or otherwise establishes an exemption. Similarly, even
if a Non-United States Noteholder does not provide such certification or
otherwise establish an exemption, unless the payor has actual knowledge that the
payee is a United States Noteholder, backup withholding will not apply to (a)
payments of interest made outside the United States to certain offshore accounts
and (b) payments on the sale, exchange, redemption, retirement or other
disposition of a Note effected outside the United States. However, information
reporting (but not backup withholding) will apply to (a) payments of interest
made by a payor outside the United States and (b) payments on the sale,
exchange, redemption, retirement or other disposition of a Note effected outside
the United States if payment is made by a broker that is, for United States
federal income tax purposes, (i) a United States person, (ii) a controlled
foreign corporation, (iii) a United States branch of a foreign bank or foreign
insurance company, (iv) a foreign partnership controlled by United States
persons or engaged in a United States trade or business or (v) a foreign person
50% or more of whose gross income is effectively connected with the conduct of a
United States trade or business for a specified three-year period, in each case
unless such payor or broker has in its records documentary evidence that the
beneficial owner is not a United States Noteholder and certain other conditions
are met or the beneficial owner otherwise establishes an exemption (in which
case neither information reporting nor backup withholding will apply). As noted
above, the IRS has announced that the 1997 Final Regulations will be amended to
be effective generally for payments after December 31, 1999, subject to certain
transition rules.
Non-United States Noteholders should consult their tax advisors regarding
the application of information reporting and backup withholding in their
particular situations, the availability of an exemption therefrom, and the
procedure for obtaining such an exemption, if available. Any amounts withheld
from a payment to a Non-United States Noteholder under the backup withholding
rules will be allowed as a credit against such Noteholder's United States
federal income tax liability and may entitle such Noteholder to a refund,
provided that the required information is furnished to the IRS.
THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION ONLY AND MAY NOT BE
APPLICABLE DEPENDING UPON A NOTEHOLDER'S PARTICULAR SITUATION. IT IS RECOMMENDED
THAT PROSPECTIVE PURCHASERS CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
TAX CONSEQUENCES TO THEM OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE
NOTES, INCLUDING THE TAX CONSEQUENCES UNDER FEDERAL, STATE, LOCAL, NON-UNITED
STATES AND OTHER TAX LAWS AND THE EFFECTS OF CHANGES IN SUCH LAWS.
ERISA CONSIDERATIONS
ERISA and/or Section 4975 of the Code impose certain requirements on
employee benefit plans and certain other plans and arrangements, including
individual retirement accounts and annuities, Keogh plans and certain collective
investment funds or insurance company general or separate accounts in which such
plans, accounts or arrangements are invested, that are subject to the fiduciary
responsibility and prohibited transaction provisions of ERISA and/or Section
4975 of the Code (collectively, "Plans"), and on persons who are fiduciaries
with respect to Plans, in connection with the investment of assets that are
treated as "plan assets" of any Plan for purposes of applying Title I of ERISA
and Section 4975 of the Code ("Plan Assets"). ERISA imposes on Plan fiduciaries
certain general fiduciary requirements, including those of investment prudence
and diversification and the requirement that a Plan's investments be made in
accordance with the documents governing the Plan. Generally, any person who has
discretionary authority or control respecting the management or disposition of
Plan Assets, and any person who provides investment advice with respect to Plan
Assets for a fee or other consideration, is a fiduciary with respect to such
Plan Assets.
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ERISA and Section 4975 of the Code prohibit a broad range of transactions
involving Plan Assets and persons who have certain specified relationship to a
Plan or its Plan Assets ("parties in interest" under ERISA and "disqualified
persons" under the Code (collectively, "Parties in Interest")), unless a
statutory or administrative exemption is available. Parties in Interest and Plan
fiduciaries that participate in a prohibited transaction may be subject to
penalties imposed under ERISA and/or excise taxes imposed pursuant to Section
4975 of the Code, unless a statutory or administrative exemption is available.
These prohibited transactions generally are set forth in Section 406 of ERISA
and Section 4975 of the Code.
Certain transactions involving the purchase, holding or transfer of the
Notes might be deemed to constitute prohibited transactions under ERISA and/or
Section 4975 of the Code if assets of the Trust were deemed to be Plan Assets.
Regulations issued by the United States Department of Labor, set forth in 29
C.F.R.--2510.3-101 (the "Plan Asset Regulations"), provide rules regarding when
assets of an entity, such as the Trust, would be treated as Plan Assets. Under
those rules, the assets of the Trust would be treated as Plan Assets of a Plan
for the purposes of ERISA and Section 4975 of the Code only if the Plan acquires
an equity interest in the Trust and none of the exceptions contained in the Plan
Asset Regulations is applicable. An equity interest is defined under the Plan
Asset Regulations as an interest in an entity other than an instrument which is
treated as indebtedness under applicable local law and which has no substantial
equity features. Although there is no authority directly on point, it is
anticipated that the Notes should be treated as indebtedness under local law
without any substantial equity features for purposes of the Plan Asset
Regulations. Accordingly, the assets of the Trust should not be treated as Plan
Assets.
Without regard to whether the Notes are treated as an equity interest for
such purposes, the acquisition or holding of Notes by or on behalf of a Plan or
with Plan Assets could be considered to give rise to a prohibited transaction if
Illinois Power, the Trust, the Indenture Trustee, the Delaware Trustee, the
Grantee, the Administrator, the Servicer, any Swap Counterparty, any Underwriter
or any of their respective affiliates is or becomes a Party in Interest with
respect to such Plan. In this event, certain exemptions from the prohibited
transaction rules could be applicable depending on the type and circumstances of
the fiduciary making the decision to acquire Notes. Included among these
exemptions are Prohibited Transaction Class Exemption ("PTCE") 75-1, which
exempts certain transactions involving Plans and certain broker-dealers,
reporting dealers and banks, PTCE 90-1, which exempts certain transactions
between insurance company separate accounts and Parties in Interest, PTCE 91-38,
which exempts certain transactions between bank collective investment funds and
Parties in Interest, PTCE 84-14, which exempts certain transactions effected on
behalf of a Plan by a "qualified professional asset manager", PTCE 95-60, which
exempts certain transactions between insurance company general accounts and
Parties in Interest and PTCE 96-23, which exempts certain transactions effected
on behalf of a Plan by an "in-house asset manager" (collectively, the
"Exemptions"). Even if the conditions specified in one or more of the Exemptions
are met, the scope of the relief provided by the Exemptions might or might not
cover all acts which might be construed as prohibited transactions.
Nevertheless, a Plan generally should not purchase Notes if Illinois Power,
the Indenture Trustee, the Delaware Trustee, the Grantee, the Administrator, the
Servicer, any Swap Counterparty, any Underwriter or any of their respective
affiliates either (a) has investment discretion with respect to the investment
of assets of such Plan; (b) has authority or responsibility to give or regularly
gives investment advice with respect to assets of such Plan for a fee and
pursuant to an agreement or understanding that such advice will serve as a
primary basis for investment decisions with respect to such assets and that such
advice will be based on the particular investment needs of such Plan; or (c) is
an employer maintaining or contributing to such Plan. A party that is described
in clause (a) or (b) of the preceding sentence is a fiduciary under ERISA with
respect to the Plan, and any such purchase might result in a "prohibited
transaction" under ERISA or the Code for which no exemption may be available.
ANY FIDUCIARY OR OTHER PLAN INVESTOR CONSIDERING WHETHER TO PURCHASE ANY
CLASS OR SERIES OF NOTES ON BEHALF OF OR WITH PLAN ASSETS OF ANY PLAN SHOULD
CONSULT WITH ITS LEGAL ADVISORS.
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Certain employee benefit plans, such as governmental plans (as defined in
Section 3(31) of ERISA) and certain church plans (as defined in Section 3(33) of
ERISA), are not subject to the requirements of ERISA or Section 4975 of the
Code. Accordingly, except as provided in the applicable Prospectus Supplement,
assets of such plans may be invested in the Notes of any Class or Series without
regard to the ERISA considerations described herein, subject to the provisions
of other applicable federal and state law. However, any such plan that is
qualified and exempt from taxation under Sections 401(a) and 501(a) of the Code
is subject to the prohibited transaction rules set forth in Section 503 of the
Code.
USE OF PROCEEDS
The Trust will pay over the proceeds received from each sale of a Series of
Notes (net of the expenses of issuance and amounts required to fund the Capital
Subaccount) to the Grantee as the consideration for the Grantee's assignment of
its ownership rights in the Intangible Transition Property and related assets
(as defined in the Basic Documents) to the Trust. The Grantee will declare
distributions to its sole member, Illinois Power, in the amount of the proceeds
received from the Trust net of the expenses of issuance and amounts required to
fund the Capital Subaccount and thereby transfer such proceeds to Illinois Power
in consideration for Illinois Power's request in each application for a
Transitional Funding Order that the related Intangible Transition Property be
granted to and vested in the Grantee.
Subject to the limitations on the use of proceeds described in "Description
of the Intangible Transition Property--Limitations on the Amounts of
Transitional Funding Instruments, Intangible Transition Property and Instrument
Funding Charges Which Can Be Authorized; Permitted Use of Proceeds," and to
market conditions, Illinois Power anticipates using the aggregate net proceeds
which it receives from the Grantee to redeem, retire or refinance mortgage bonds
and notes, together with certain premia anticipated in connection with such
redemptions, to redeem preferred stock and securities, to repurchase common
equity from its parent company, including commissions in connection with such
repurchases, and to pay any transaction costs incurred in connection with such
redemptions, retirements, refinancings and repurchases. Illinois Power's parent
company will use the proceeds it receives from any repurchase of Illinois Power
common equity to repurchase the parent company's publicly-traded common stock,
including payment of commissions thereon.
PLAN OF DISTRIBUTION
The Notes of each Series may be sold to or through underwriters named in the
related Prospectus Supplement (the "Underwriters") by a negotiated firm
commitment underwriting and public reoffering by the Underwriters or such other
underwriting arrangement as may be specified in the related Prospectus
Supplement or may be offered or placed either directly or through agents. The
Grantee and the Trust intend that Notes will be offered through such various
methods from time to time and that offerings may be made concurrently through
more than one of such methods or that an offering of a particular Series of
Notes may be made through a combination of such methods.
The distribution of Notes may be effected from time to time in one or more
transactions at a fixed price or prices, which may be changed, or at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or in negotiated transactions or otherwise at varying prices to be
determined at the time of sale.
In connection with the sale of the Notes, Underwriters or agents may receive
compensation in the form of discounts, concessions or commissions. Underwriters
may sell Notes to certain dealers at prices less a concession. Underwriters may
allow and such dealers may reallow a concession to certain other dealers.
Underwriters, dealers and agents that participate in the distribution of the
Notes of a Series may be deemed to be underwriters and any discounts or
commissions received by them from the Trust and any profit on the resale of the
Notes by them may be deemed to be underwriting discounts and commissions
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under the Securities Act. Any such Underwriters or agents will be identified,
and any such compensation received from the Trust will be described in the
related Prospectus Supplement.
Under agreements which may be entered into by the Grantee and the Trust,
Underwriters and agents who participate in the distribution of the Notes may be
entitled to indemnification by the Grantee and Illinois Power and against
certain liabilities, including liabilities under the Securities Act.
The Underwriters may, from time to time, buy and sell Notes, but there can
be no assurance that an active secondary market will develop and there is no
assurance that any such market, if established, will continue.
RATINGS
It is a condition of issuance of each Class of Notes that at the time of
issuance such Class receive the rating indicated in the related Prospectus
Supplement, which will be in one of the four highest categories, from at least
one Rating Agency.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning Rating
Agency. No person is obligated to maintain the rating on any Note, and,
accordingly, there can be no assurance that the ratings assigned to any Class of
Notes upon initial issuance will not be lowered or withdrawn by a Rating Agency
at any time thereafter. If a rating of any Class of Notes is revised or
withdrawn, the liquidity of such Class of Notes may be adversely affected. In
general, ratings address credit risk and do not represent any assessment of the
rate of principal payments on the Notes.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Notes will be passed
upon for the Trust by Schiff Hardin & Waite, Chicago, Illinois and for the
Underwriters by Brown & Wood LLP, New York, New York. Certain legal matters
relating to the United States federal tax consequences of the issuance of the
Notes will be passed upon for the Trust by Mayer, Brown & Platt, Chicago,
Illinois. Certain legal matters relating to the Trust will be passed upon for
the Trust by Richards, Layton & Finger, P.A., Wilmington, Delaware.
EXPERTS
The financial statements of Illinois Power Securitization Limited Liability
Company as of September 11, 1998 and for the period from September 10, 1998
(date of inception) through September 11, 1998 and Illinois Power Special
Purpose Trust as of December 2, 1998 and for the period from December 1, 1998
(date of inception) through December 2, 1998 included in this Prospectus have
been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
120
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
<TABLE>
<CAPTION>
DEFINED TERM DEFINED ON PAGE
- ------------------------------------------------------------------------------------------------- ---------------
<S> <C>
1997 Final Regulations........................................................................... 114
Act.............................................................................................. 9
Adjustment Date.................................................................................. 18, 58
Adjustments...................................................................................... 18
Administration Agreement......................................................................... 11
Administration Fee............................................................................... 106
Administrator.................................................................................... 11
Amendatory Act................................................................................... 9, 46
Amendatory Tariff................................................................................ 18
Annual Accountant's Report....................................................................... 89
Applicable Rates................................................................................. 16, 56
ARES............................................................................................. 49
Basic Documents.................................................................................. 108
Beneficiary Trustee.............................................................................. 12
Billing Period................................................................................... 24, 87
Book Entry Note.................................................................................. 26
Book-Entry Notes................................................................................. 26
Business Day..................................................................................... 95
Capital Subaccount............................................................................... 22, 103
Cede............................................................................................. 3
CEDEL............................................................................................ 96
CEDEL Participants............................................................................... 97
Class............................................................................................ 1, 12
Code............................................................................................. 27, 112
Collection Account............................................................................... 103
Commission....................................................................................... 2
Cooperative...................................................................................... 98
Customers........................................................................................ 16
Daily Remittance Date............................................................................ 86
Definitive Notes................................................................................. 98
Delaware Trustee................................................................................. 1, 12
Depositaries..................................................................................... 96
DTC.............................................................................................. 3
Duff & Phelps.................................................................................... 42
Eligible Institution............................................................................. 103
Eligible Investments............................................................................. 103
ERISA............................................................................................ 27
Euroclear........................................................................................ 96
Euroclear Operator............................................................................... 98
Euroclear Participants........................................................................... 98
Event of Default................................................................................. 20, 109
Exchange Act..................................................................................... 3
Excluded Amounts................................................................................. 16, 56
Exemptions....................................................................................... 118
Expected Amortization Schedule................................................................... 20
Expected Maturity Date........................................................................... 93
FDIC............................................................................................. 103
</TABLE>
121
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM DEFINED ON PAGE
- ------------------------------------------------------------------------------------------------- ---------------
<S> <C>
FERC............................................................................................. 36
Final Maturity Date.............................................................................. 19, 93
Financial Institution............................................................................ 114
Fitch............................................................................................ 42
Floating Rate Notes.............................................................................. 13
Funding Law...................................................................................... 9
General Subaccount............................................................................... 22, 103
Grant Agreement.................................................................................. 9
Grant Agreements................................................................................. 9
Grantee.......................................................................................... 12
ICC.............................................................................................. 9
IFC Charges...................................................................................... 15
IFC Collections.................................................................................. 12
IFC Customer Class............................................................................... 74
IFC Customer Classes............................................................................. 74
IFC Payments..................................................................................... 15, 55
IFC Tariff....................................................................................... 10
Illinois Power................................................................................... 9
Illinova......................................................................................... 11
Indenture........................................................................................ 12, 92
Indenture Trustee................................................................................ 14
Independent Managers............................................................................. 73
Indirect Participants............................................................................ 26
Initial Intangible Transition Property........................................................... 58
Initial TFO...................................................................................... 54
Intangible Transition Property................................................................... 15
IRS.............................................................................................. 111
Lost Revenue Recoveries.......................................................................... 87
Monthly IFC Amount............................................................................... 87
Monthly Remittance Conditions.................................................................... 43
Monthly Remittance Date.......................................................................... 24, 87
Monthly Servicer's Certificate................................................................... 89
Moody's.......................................................................................... 42
New Notes........................................................................................ 21, 99
Non-United States Noteholder..................................................................... 113
Note Interest Rate............................................................................... 93
Noteholders...................................................................................... 3, 111
Notes............................................................................................ 1, 9
Operating Expenses............................................................................... 13
Overcollateralization Amount..................................................................... 23, 104
Overcollateralization Subaccount................................................................. 23, 103
Participants..................................................................................... 26
Parties in Interest.............................................................................. 118
Payment Date..................................................................................... 18, 93
Plan Asset Regulations........................................................................... 118
Plan Assets...................................................................................... 117
Plans............................................................................................ 117
PTCE............................................................................................. 118
Qualified Intermediaries......................................................................... 114
Quarterly Interest............................................................................... 106
</TABLE>
122
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM DEFINED ON PAGE
- ------------------------------------------------------------------------------------------------- ---------------
<S> <C>
Rating Agencies.................................................................................. 14
Rating Agency.................................................................................... 14
Rating Agency Condition.......................................................................... 44, 93
Reconciliation Period............................................................................ 18
Record Date...................................................................................... 19
Reporting Customer Class......................................................................... 74
Reporting Customer Classes....................................................................... 74
Required Capital Level........................................................................... 23, 104
Required Overcollateralization Level............................................................. 23, 104
Reserve Subaccount............................................................................... 22, 103
Rules............................................................................................ 97
S&P.............................................................................................. 42
Sale Agreement................................................................................... 9
Sale Agreements.................................................................................. 9
SC............................................................................................... 74
Scheduled Payment................................................................................ 20, 94
Securities Act................................................................................... 2
Series........................................................................................... 1, 12
Series Issuance Date............................................................................. 24, 86, 93
Servicer......................................................................................... 11
Servicer Business Day............................................................................ 24, 79
Servicer Defaults................................................................................ 90
Servicing Agreement.............................................................................. 10
Servicing Fee.................................................................................... 26
Servicing Standard............................................................................... 24
Specified Payments............................................................................... 10
State Pledge..................................................................................... 18
Subsequent Intangible Transition Property........................................................ 58
Subsequent Transfer Date......................................................................... 58
Successor Servicer............................................................................... 91
Swap Agreement................................................................................... 10, 95
Swap Counterparty................................................................................ 95
Terms and Conditions............................................................................. 98
TIN.............................................................................................. 115
Transitional Funding Order....................................................................... 14, 54
Trust............................................................................................ 1, 12
Trust Agreement.................................................................................. 1, 12
Trustees......................................................................................... 71
UCC.............................................................................................. 43
Underwriters..................................................................................... 119
United States Noteholder......................................................................... 112
Utilities........................................................................................ 9
Utility.......................................................................................... 9
</TABLE>
(THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK)
123
<PAGE>
INDEX OF FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Financial Statements of the Grantee......................................................................... F-2
Report of Independent Accountants......................................................................... F-3
Statement of Operations................................................................................... F-4
Balance Sheet............................................................................................. F-5
Statement of Changes in Member's Equity................................................................... F-6
Statement of Cash Flows................................................................................... F-7
Notes to Financial Statements............................................................................. F-8
Financial Statements of the Trust........................................................................... F-10
Definitions............................................................................................... F-11
Report of Independent Accountants......................................................................... F-12
Statement of Operations................................................................................... F-13
Balance Sheet............................................................................................. F-14
Statement of Changes in Owner's Equity.................................................................... F-15
Statement of Cash Flows................................................................................... F-16
Notes to Financial Statements............................................................................. F-17
</TABLE>
F-1
<PAGE>
ILLINOIS POWER SECURITIZATION LIMITED LIABILITY COMPANY
(A DELAWARE LIMITED LIABILITY COMPANY WHOSE SOLE MEMBER IS ILLINOIS POWER
COMPANY)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 11, 1998
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
F-2
<PAGE>
[PricewaterhouseCoopers LLP Letterhead]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Member of Illinois Power
Securitization Limited Liability Company
September 15, 1998
In our opinion, the accompanying balance sheet and the related statements of
operations and change in member's equity and of cash flows present fairly, in
all material respects, the financial position of Illinois Power Securitization
Limited Liability Company at September 11, 1998, and the results of its
operations and its cash flows for the period from September 10, 1998 (date of
inception) through September 11, 1998 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based our audit. We conducted our audit of these statements
in accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
F-3
<PAGE>
ILLINOIS POWER SECURITIZATION LIMITED LIABILITY COMPANY
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM SEPTEMBER 10, 1998 (DATE OF INCEPTION)
TO SEPTEMBER 11, 1998
<TABLE>
<S> <C>
Revenues........................................................................... $ --
Expenses........................................................................... $ --
---------
Net Income (Loss).................................................................. $ --
---------
---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
ILLINOIS POWER SECURITIZATION LIMITED LIABILITY COMPANY
BALANCE SHEET
SEPTEMBER 11, 1998
<TABLE>
<S> <C>
ASSETS
Total Assets....................................................................... $ --
---------
---------
LIABILITIES AND MEMBER'S EQUITY
Member's Equity.................................................................... $ 1,000
Less: Equity Contribution Due from Illinois Power Company.......................... 1,000
---------
Total Liabilities and Member's Equity.............................................. $ --
---------
---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
ILLINOIS POWER SECURITIZATION LIMITED LIABILITY COMPANY
STATEMENT OF CHANGES IN MEMBER'S EQUITY
FOR THE PERIOD FROM SEPTEMBER 10, 1998 (DATE OF INCEPTION)
TO SEPTEMBER 11, 1998
<TABLE>
<S> <C>
Member's Equity at Inception........................................................ $ --
Add: Contributed Equity........................................................... 1,000
Less: Equity Contribution Due from Illinois Power Company 1,000
---------
Member's Equity at End of Period.................................................... $ --
---------
---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
ILLINOIS POWER SECURITIZATION LIMITED LIABILITY COMPANY
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM SEPTEMBER 10, 1998 (DATE OF INCEPTION)
TO SEPTEMBER 11, 1998
<TABLE>
<S> <C>
Cash Flows from Operating Activities:
Net Income (Loss)................................................................ $ --
---------
Net Cash Used in Operating Activities.......................................... $ --
---------
Cash Flows from Investing Activities:
Equity Contribution in Illinois Power Special Purpose Trust:..................... $ --
---------
Net Cash Used in Investing Activities.......................................... $ --
---------
Cash Flows from Financing Activities:
Net Cash Provided by Financing Activities...................................... $ --
---------
Net Increase/(Decrease) in Cash.................................................... $ --
Cash at Inception.................................................................. --
---------
Cash at End of Period.............................................................. --
---------
---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
ILLINOIS POWER SECURITIZATION LIMITED LIABILITY COMPANY
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The financial statements include the accounts of Illinois Power
Securitization Limited Liability Company (IPS), a special purpose Delaware
limited liability company, whose sole member is Illinois Power Company (IP). IP,
the principal subsidiary of Illinova Corporation (Illinova), is engaged in the
production, purchase, transmission, distribution and sale of electricity to a
diverse base of customers. IPS was formed on September 10, 1998, for the
exclusive purposes of (i) initially owning the "intangible transition property"
(described below), (ii) assigning all of its right, title and interest in the
intangible transition property and the Intangible Transition Property Servicing
Agreement (Servicing Agreement) to Illinois Power Special Purpose Trust (Trust)
(described below), and (iii) entering into the servicing agreement with IP (the
Servicer) in respect to the intangible transition property. The Trust is a
special purpose Delaware business trust which will issue Transitional Funding
Trust Notes (Notes) secured by the intangible transition property to investors
and will remit the proceeds to IPS in consideration for the transferring of its
interest in the intangible transition property. IPS, in turn, will remit the net
proceeds to IP in consideration for IP's actions in applying for and obtaining
the Transitional Funding Order from the Illinois Commerce Commission (ICC)
creating the intangible transition property in IPS. The Trust anticipates that
the Notes will be issued sometime in the fourth quarter of 1998.
IPS was organized solely to acquire, own, hold, administer, service or enter
into agreements regarding the receipt and servicing of, intangible transition
property, along with certain other related assets. The Trust will be organized
with the sole purpose of limited business activities as are necessary or
reasonably related to the issuance of the Notes. IPS and the Trust are
structured and are to be operated in a manner such that even in the event of
bankruptcy proceedings against IP, the assets of IPS and the Trust will not be
consolidated into the bankruptcy estate of IP.
The intangible transition property is the separate property right, as
created under the Transitional Funding Order issued by the ICC to IP on
September 10, 1998, including, without limitation, the right, title and interest
to impose and collect instrument funding charges (IFC). IFC's are nonbypassable,
usage-based, per kilowatt-hour charges to be imposed on designated consumers of
electricity.
2. SUMMARY OF ACCOUNTING POLICIES
(a) GENERAL
IPS follows the accrual method of accounting. IPS will pay its own
operating expenses and liabilities from its own separate assets.
Administrative and general expenses incurred by IP on behalf of IPS will be
reimbursed by IPS in accordance with the Administration Agreement approved
by the ICC.
(b) RESIDUAL INTEREST IN THE TRUST
Certain proceeds derived from the sale of the Notes will be retained for
the benefit of the Trust in a Capital Subaccount. IPS will have the residual
interest in the Trust.
(c) INCOME TAXES
As a limited liability company, the member intends for IPS to be treated
as a partnership for tax purposes. Income and losses are passed through to
the member and, accordingly, there is no provision for income taxes.
F-8
<PAGE>
ILLINOIS POWER SECURITIZATION LIMITED LIABILITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
(d) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. SIGNIFICANT AGREEMENTS AND RELATED PARTY TRANSACTIONS
Notwithstanding the non-recourse nature of the transactions, IP
(individually, as Servicer or otherwise) will be required under the transaction
documents (i) to make certain representations and warranties with respect to,
among other things, the validity of IPS and its assignees' title to the
intangible transition property and (ii) to observe certain covenants for the
benefit of IPS and its assignees. IP will also be required to indemnify IPS and
its assignees against any breaches of such representations, warranties and
covenants and to protect such parties against certain other losses, which result
from actions or inactions of IP.
IP will act as the initial servicer (in such capacity, together with any
successor-in-interest, the "Servicer") for IPS under the transaction documents.
IPS rights under the Servicing Agreement will be assigned to the Trust. The
transaction documents will contain provisions allowing the Servicer to be
replaced under limited circumstances. The Servicer will be paid a servicing fee
in consideration for billing and collecting the IFCs on behalf of the Trust,
calculating the reconciliation and true-up adjustments and performing related
services. Such servicing fees shall be paid to the Servicer from the IFC
collections.
F-9
<PAGE>
ILLINOIS POWER SPECIAL PURPOSE TRUST
(A DELAWARE BUSINESS TRUST)
FINANCIAL STATEMENTS
AS OF DECEMBER 2, 1998
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
F-10
<PAGE>
DEFINITIONS
The following terms are used in the following Financial Statements with the
following meanings:
<TABLE>
<CAPTION>
TERM MEANING
- ------------------ ----------------------------------------------------------------------------------------------
<S> <C>
IPS............... Illinois Power Securitization Limited Liability Company, a Delaware limited liability company,
whose sole member is Illinois Power
Illinois Power.... Illinois Power Company, a wholly-owned subsidiary of Illinova
Funding Law....... The Illinois Electric Utility Transitional Funding Law of 1997
IFC............... Instrument Funding Charges
Notes............. Transitional Funding Trust Notes
Servicer.......... Responsible for Servicing, Managing and Receiving IFC Payments for a Servicing Fee
Transitional Illinois Commerce Commission order, dated September 10, 1998, issued pursuant to the Funding
Funding Order..... Law, which provides, among other things, for the creation of intangible transition property
Trust............. Illinois Special Purpose Trust, a Delaware business trust
Illinova.......... Illinova Corporation
</TABLE>
F-11
<PAGE>
[PricewaterhouseCoopers LLP Letterhead]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Owner of Illinois Power
Special Purpose Trust
December 3, 1998
In our opinion, the accompanying balance sheet and the related statements of
operations and changes in owner's equity and of cash flows present fairly, in
all material respects, the financial position of Illinois Power Special Purpose
Trust at December 2, 1998, and the results of its operations and its cash flows
for the period from December 1, 1998 (date of inception) through December 2,
1998 in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
F-12
<PAGE>
ILLINOIS POWER SPECIAL PURPOSE TRUST
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM DECEMBER 1, 1998 (DATE OF INCEPTION) TO DECEMBER 2, 1998
<TABLE>
<CAPTION>
<S> <C>
Revenues.............................................................................................. $ --
Expenses.............................................................................................. $ --
----------
Net Income (Loss)..................................................................................... $ --
----------
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE>
ILLINOIS POWER SPECIAL PURPOSE TRUST
BALANCE SHEET
DECEMBER 2, 1998
<TABLE>
<S> <C>
ASSETS
Total Assets...................................................................... $ --
---------
---------
LIABILITIES AND OWNER'S EQUITY
Owner's Equity...................................................................... $ 1,000
Less: Equity Contribution Due from Illinois Power Securitization
Limited Liability Company................................................... 1,000
---------
Total Liabilities and Member's Equity............................................. $ --
---------
---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-14
<PAGE>
ILLINOIS POWER SPECIAL PURPOSE TRUST
STATEMENT OF CHANGES IN OWNER'S EQUITY
FOR THE PERIOD FROM DECEMBER 1, 1998 (DATE OF INCEPTION) TO DECEMBER 2, 1998
<TABLE>
<CAPTION>
Owner's Equity at Inception........................................................ $ --
<S> <C>
Add: Contributed Equity.......................................................... 1,000
Less: Equity Contribution Due from Illinois Power Securitization Limited
Liability Company........................................................ 1,000
---------
Owner's Equity at End of Period.................................................... $ --
---------
---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-15
<PAGE>
ILLINOIS POWER SPECIAL PURPOSE TRUST
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM DECEMBER 1, 1998 (DATE OF INCEPTION) TO DECEMBER 2, 1998
<TABLE>
<CAPTION>
Cash Flows from Operating Activities:
<S> <C>
Net Income (Loss)................................................................. $ --
---------
Net Cash Used in Operating Activities........................................... $ --
---------
Cash Flows from Investing Activities:
Equity Contribution in Illinois Power Special Purpose Trust....................... $ --
---------
Net Cash Used in Investing Activities........................................... $ --
---------
Cash Flows from Financing Activities:
Net Cash Provided by Financing Activities....................................... $ --
---------
Net Increase/(Decrease) in Cash..................................................... $ --
Cash at Inception................................................................... $ --
---------
Cash at End of Period............................................................... $ --
---------
---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-16
<PAGE>
ILLINOIS POWER SPECIAL PURPOSE TRUST
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The financial statements include the accounts of Illinois Power Special
Purpose Trust (Trust), a special purpose Delaware business trust, whose sole
owner is Illinois Power Securitization Limited Liability Company (IPS). IPS is a
special purpose Delaware limited liability company, whose sole member is
Illinois Power (IP). IP, the principal subsidiary of Illinova Corporation
(Illinova), is engaged in the production, purchase, transmission, distribution
and sale of electricity to a diverse base of customers. The Trust was formed on
December 1, 1998, for the exclusive purpose of issuing Transitional Funding
Trust Notes (Notes) and will remit the proceeds to IPS in consideration for the
transferring of IPS' interest in the intangible transition property (described
below). IPS, in turn, will remit the net proceeds to IP in consideration for the
intangible transition property that will be vested in IPS. IPS was formed on
September 10, 1998, for the exclusive purposes of (i) initially owning the
"intangible transition property" (described below), (ii) assigning all of its
right, title and interest in the intangible transition property and the
Intangible Transition Property Servicing Agreement (Servicing Agreement) to the
Trust, and (iii) entering into the servicing agreement with IP (the Servicer) in
respect to the intangible transition property. The Trust is a special purpose
Delaware business trust which will issue Notes secured by the intangible
transition property to investors and will remit the proceeds to IPS in
consideration for the transferring of its interest in the intangible transition
property. IPS, in turn, will remit the net proceeds to IP in consideration for
IP's actions in applying for and obtaining the Transitional Funding Order from
the Illinois Commerce Commission (ICC) creating the intangible transition
property in IPS. The assets of the Trust will consist of the intangible
transition property and the other collateral, including capital transferred by
IPS in an amount specified in the Prospectus Supplement which will be sufficient
to meet certain requirements of the indenture between the Trust and the
indenture trustee. IP anticipates that the Notes will be issued sometime in the
fourth quarter of 1998.
The Trust was organized for the sole purpose of limited business activities
as are necessary or reasonably related to the issuance of the Notes. IPS and the
Trust are structured and are to be operated in a manner such that even in the
event of bankruptcy proceedings against IP, the assets of IPS and the Trust will
not be consolidated into the bankruptcy estate of IP.
The intangible transition property is the separate property right, as
created under the Transitional Funding Order issued by the ICC to IP on
September 10, 1998, including, without limitation, the right, title and interest
to impose and receive instrument funding charges (IFC). IFC's are
non-bypassable, usage-based, per kilowatt-hour charges to be imposed on
designated consumers of electricity.
2. SUMMARY OF ACCOUNTING POLICIES
(A) GENERAL
The Trust follows the accrual method of accounting. The Trust will pay
its own operating expenses and liabilities from its own separate assets.
Administrative and general expenses incurred by IP on behalf of the Trust
will be reimbursed by the Trust in accordance with the Administration
Agreement approved by the ICC.
(B) UNAMORTIZED ISSUANCE EXPENSE IN CONNECTION WITH THE NOTES
The unamortized issuance expenses in connection with the Notes will be
amortized over the life of the Notes.
F-17
<PAGE>
ILLINOIS POWER SPECIAL PURPOSE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
(C) INCOME TAXES
As a special purpose business trust, the member of IPS intends for the
Trust, IPS, and IP to be treated as a single entity for tax purposes.
Income and losses are passed through to the member of IPS and,
accordingly, there is no provision for income taxes.
(D) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
3. SIGNIFICANT AGREEMENTS AND RELATED PARTY TRANSACTIONS
Notwithstanding the non-recourse nature of the transactions, IP
(individually, as Servicer or otherwise) will be required under the transaction
documents (i) to make certain representations and warranties with respect to,
among other things, the validity of IPS' and its assignees' title to the
intangible transition property and (ii) to observe certain covenants for the
benefit of IPS and its assignees. IP will also be required to indemnify IPS and
its assignees against any breaches of such representations, warranties and
covenants and to protect such parties against certain other losses, which result
from actions or inactions of IP.
IP will act as the initial servicer (in such capacity, together with any
successor-in-interest, the "Servicer") for IPS under the transaction documents.
IPS' rights under the Servicing Agreement will be assigned to the Trust. The
transaction documents will contain provisions allowing the Servicer to be
replaced under limited circumstances. The Servicer will be paid a servicing fee
in consideration for billing and collecting the IFCs on behalf of the Trust,
calculating the Adjustments and performing related services. Such servicing fees
shall be paid to the Servicer from the IFC collections.
F-18
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH THEY RELATE OR ANY OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY
SUCH SECURITIES IN ANY JURISDICTIONS IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS
NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF ILLINOIS POWER
SINCE THE DATE HEREOF OR THEREOF OR THAT THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.
------------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Reports to Holders............................. S-3
Prospectus Supplement Summary.................. S-4
Description of the Offered Notes............... S-14
Description of the Intangible Transition
Property..................................... S-17
The Servicer................................... S-19
Servicing...................................... S-19
Material United States Federal Tax
Consequences................................. S-20
Underwriting................................... S-21
Ratings........................................ S-22
Legal Matters.................................. S-22
Index of Principal Definitions................. S-23
PROSPECTUS
Available Information.......................... 2
Reports to Holders............................. 3
Incorporation of Certain Documents by
Reference.................................... 3
Prospectus Supplement.......................... 4
Table of Contents.............................. 5
Prospectus Summary............................. 9
Risk Factors................................... 29
Electric Industry Restructuring in Illinois.... 46
Description of the Intangible Transition
Property..................................... 50
Certain Payment, Weighted Average Life and
Yield Considerations......................... 70
The Trust...................................... 71
The Grantee.................................... 72
The Servicer................................... 74
Servicing...................................... 84
Description of the Notes....................... 92
Security for the Notes......................... 101
Material United States Federal Tax
Consequences................................. 111
ERISA Considerations........................... 117
Use of Proceeds................................ 119
Plan of Distribution........................... 119
Ratings........................................ 120
Legal Matters.................................. 120
Experts........................................ 120
Index of Principal Definitions................. 121
Index of Financial Statements.................. F-1
</TABLE>
UNTIL NINETY DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE OFFERED NOTES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS SUPPLEMENT AND A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
$864,000,000
ILLINOIS POWER SPECIAL PURPOSE TRUST
TRANSITIONAL FUNDING
TRUST NOTES,
SERIES 1998-1
$ CLASS A-1 % NOTES
$ CLASS A-2 % NOTES
$ CLASS A-3 % NOTES
$ CLASS A-4 % NOTES
$ CLASS A-5 % NOTES
$ CLASS A-6 % NOTES
$ CLASS A-7 % NOTES
ILLINOIS POWER COMPANY
SERVICER
----------------------------
PROSPECTUS SUPPLEMENT
----------------------------
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE
FIRST CHICAGO CAPITAL MARKETS, INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
ABN AMRO INCORPORATED
A.G. EDWARDS & SONS, INC.
J.P. MORGAN & CO.
LOOP CAPITAL MARKETS, LLC
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF INSURANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Securities and Exchange Commission filing fee...................... $ 240,192
Blue sky fees and expenses......................................... 10,000
Printing and engraving expenses.................................... 500,000
Accountants' fees and expenses..................................... 75,000
Trustees' fees and expenses........................................ 75,000
Legal fees and expenses............................................ 1,300,000
Rating Agency fees................................................. 300,000
Miscellaneous fees and expenses.................................... 500,000
---------
Total........................................................ $3,000,192
---------
---------
</TABLE>
- ------------------------
All of the fees, costs and expenses set forth above will be paid by the Trust.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Title 12, Section 3817 of the Delaware Code (the "Delaware Act") provides
that subject to such standards and restrictions, if any, as are set forth in its
governing instrument, a Delaware Business Trust may and has the power to
indemnify and hold harmless any trustee or beneficial owner or other person from
and against any and all claims and demands. The Delaware Act also provides that
the absence of a provision for indemnity in the governing instrument of a
business trust shall not be construed to deprive any trustee or beneficial owner
or other person of any right to indemnity which is otherwise available to such
person under the laws of the State of Delaware.
Section 6.07 of the Indenture provides that the Trust shall indemnify the
Indenture Trustee and its officers, directors, employees and agents against any
loss, liability or expense incurred by it in connection with the administration
of the trust and the performance of its duties under the Indenture, except for
any loss, liability or expense incurred as a result of the Indenture Trustee's
own willful misconduct, negligence or bad faith.
Section 18-108 of the Delaware Limited Liability Company Act provides that
subject to such standards and restrictions, if any, as are set forth in its
limited liability company agreement, a limited liability company may and has the
power to indemnify and hold harmless any member or manager or other person from
and against any and all claims and demands whatsoever. Section 10.1 of the
Amended and Restated Limited Liability Company Agreement of the Grantee provides
that the Grantee shall, to the fullest extent permitted by law, indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Grantee) by reason of the fact that he is or was a manager,
officer, employee or agent of the Grantee, or is or was serving at the request
of the Grantee as a manager, director, officer, employee or agent of another
company, partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Grantee, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
Under Section 8.75 of the Illinois Business Corporation Act of 1983 (the
"BCA"), Illinois Power Company ("Illinois Power") is empowered, subject to the
procedures and limitations stated therein, to
II-1
<PAGE>
indemnify any person against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with any threatened, pending or completed action, suit or proceeding
to which such person is made a party or threatened to be made a party by reason
of his being or having been a director, officer, employee or agent of Illinois
Power, or serving or having served at the request of Illinois Power as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise. Section 8.75 of the BCA further provides
that indemnification pursuant to its provisions is not exclusive of other rights
of indemnification to which a person may be entitled under any by-law,
agreement, vote of stockholders or disinterested director, officer, employee or
agent of Illinois Power who has ceased to serve in such capacity, and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
The By-Laws of Illinois Power provide, in substance, that Illinois Power
shall indemnify any person against expense (including attorney's fees),
judgments, fines and amount paid in settlement actually and reasonably incurred
by him in connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, to which
such person is made a party or threatened to be made a party by reason of his
being or having been a director, officer, employee, trustee or fiduciary of
Illinois Power, or serving or having served at the request of Illinois Power in
one or more of the foregoing capacities with another corporation, partnership,
joint venture, trust or other enterprise. The indemnification is not exclusive
of other rights and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of his
heirs, executors and administrators. In addition, Illinois Power's Amended and
Restated Articles of Incorporation provide indemnification protection to the
full extent permitted by the BCA and further provide that a director of Illinois
Power shall not be personally liable to Illinois Power or its shareholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to Illinois Power
or its shareholders, (ii) for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (iii) under
Section 8.65 of the BCA or (iv) for any transaction from which the director
derived an improper benefit.
Illinois Power presently has an insurance policy which, among other things,
includes liability insurance coverage for officers and directors under which
officers and directors are covered against any "losses" arising from any claim
or claims made against them by reason of any "wrongful act" in their respective
capacities of directors or officers. "Loss" is specifically defined to exclude
fines and penalties as well as matters deemed uninsurable under the law pursuant
to which the insurance policy shall be construed. The policy also contains other
specific exclusions, including illegally obtained personal profit or advantages,
and dishonesty. The policy also provides for reimbursement to Illinois Power,
subject to certain deductibles, for loss incurred by having indemnified officers
or directors as authorized by state statute, Illinois Power's By-Laws or any
other agreement.
The indemnification provided by the Delaware Code, the Delaware Limited
Liability Company Act, the Grantee's Limited Liability Company Agreement and the
Indenture is not exclusive of any other rights to which the Delaware Trustee,
the Indenture Trustee, the members and managers of the Grantee, the officers and
directors of Illinois Power and any beneficial owner of the Trust may be
entitled.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- -------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
*3.1 Certificate of Formation of the Registrant.
*3.2 Amended and Restated Limited Liability Company Agreement of the
Registrant.
*4.1 Declaration of Trust of the Trust.
4.2 Form of Transitional Funding Trust Note (included as Exhibit B to Exhibit
4.3).
4.3 Form of Indenture.
5.1 Opinion of Schiff Hardin & Waite relating to the legality of the
Transitional Funding Trust Notes.
*5.2 Opinion of Richards, Layton & Finger, P.A.
*8.1 Opinion of Mayer, Brown & Platt with respect to material federal tax
matters.
10.1 Form of Sale Agreement.
10.2 Form of Grant Agreement.
10.3 Form of Servicing Agreement.
*10.4 Form of Administration Agreement.
10.5 Form of Remediation Agreement.
23.1 Consent of Schiff Hardin & Waite (included in Exhibit 5.1).
*23.2 Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2).
*23.3 Consent of Mayer, Brown & Platt (included in Exhibit 8.1).
*23.4 Consent of PricewaterhouseCoopers LLP with respect to the Registrant.
*23.5 Consent of PricewaterhouseCoopers LLP with respect to the Trust.
*24.1 Power of Attorney with respect to the Registrant (included on page II-5 of
Amendment No. 1 to the Registration Statement).
*24.2 Power of Attorney with respect to the Trust (included on page II-5 of
Amendment No. 2 to the Registration Statement).
*25 Form T-1.
*99.1 Application for Transitional Funding Order.
*99.2 Transitional Funding Order.
*99.3 Internal Revenue Service Private Letter Ruling pertaining to the Notes.
</TABLE>
- ------------------------
* Previously filed.
ITEM 17. UNDERTAKINGS.
The Registrant, on behalf of the Illinois Power Special Purpose Trust (the
"Trust") hereby undertakes as follows:
(a)(1) To do, or, pursuant to the Administration Agreement to cause Illinois
Power Company (the "Administrator") to file, during any period in which offers
or sales are being made, a post-effective amendment to this Registration
Statement: (i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933; (ii) to reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
II-3
<PAGE>
in the aggregate, represent a fundamental change in the information set forth in
the Registration Statement (notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of a prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement); and (iii) to
include any material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change to
such information in the Registration Statement; provided, however, that
(a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included
in a post-effective amendment by those paragraphs is contained in periodic
reports filed pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering hereof.
(3) To remove, or to cause the Administrator to remove, from registration by
means of a post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the Trust's annual report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934), with respect to the Trust that is incorporated
by reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities to be offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) That insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to the Delaware Trustee, the Indenture
Trustee, the managers and members of the Grantee and the directors and officers
of the Administrator pursuant to the provisions described in Item 15 above, or
otherwise, the Registrant, the Grantee and the Administrator have been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Delaware Trustee, Indenture Trustee, the
managers or members of the Grantee, or the directors or officers of the
Administrator in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of each issue.
(d) That, for purposes of determining any liability under the Securities Act
of 1933, as amended, the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(i) or
(4) or 497(h) under the Securities Act of 1933, as amended, shall be deemed to
be part of this Registration Statement as of the time it was declared effective.
(e) That, for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering hereof.
II-4
<PAGE>
(f) The undersigned Registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the Indenture Trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act of 1939, as amended, in
accordance with the rules and regulations prescribed by the Commission under
Section 305(b)(2) of the Trust Indenture Act of 1939, as amended.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant and the Trust each certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and that
the security rating requirement of Form S-3 will be met by the time of sale, and
has duly caused this Amendment No. 3 of the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Decatur, State of Illinois, on this 9th day of December, 1998.
ILLINOIS POWER SECURITIZATION
LIMITED LIABILITY COMPANY
By: /s/ ELIZABETH S. ELDRIDGE*
-----------------------------------------
Elizabeth S. Eldridge
MANAGER
By: /s/ DOUGLAS K. JOHNSON*
-----------------------------------------
Douglas K. Johnson
MANAGER
By: /s/ DANIEL L. MORTLAND*
-----------------------------------------
Daniel L. Mortland
MANAGER
By: /s/ CYNTHIA G. STEWARD
-----------------------------------------
Cynthia G. Steward
MANAGER
By: /s/ ERIC B. WEEKES
-----------------------------------------
Eric B. Weekes
MANAGER
ILLINOIS POWER SPECIAL
PURPOSE TRUST
By: /s/ CYNTHIA G. STEWARD
-----------------------------------------
Cynthia G. Steward, BENEFICIARY TRUSTEE
By: /s/ ERIC B. WEEKES
-----------------------------------------
Eric B. Weekes, BENEFICIARY TRUSTEE
II-6
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ ELIZABETH S. ELDRIDGE*
- ------------------------------ Manager December 9, 1998
Elizabeth S. Eldridge
/s/ DOUGLAS K. JOHNSON*
- ------------------------------ Manager December 9, 1998
Douglas K. Johnson
/s/ DANIEL L. MORTLAND*
- ------------------------------ Manager December 9, 1998
Daniel L. Mortland
/s/ CYNTHIA G. STEWARD
- ------------------------------ Manager December 9, 1998
Cynthia G. Steward
/s/ ERIC B. WEEKES
- ------------------------------ Manager December 9, 1998
Eric B. Weekes
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ ERIC B. WEEKES
-------------------------
Eric B. Weekes
ATTORNEY-IN-FACT
(Pursuant to Powers of
Attorney previously filed
as Exhibits to this
Registration Statement)
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER EXHIBIT DESCRIPTION PAGE NUMBER
- ------------------------------------------------------------------------------------- -------------
<C> <S> <C>
1.1 Form of Underwriting Agreement.
*3.1 Certificate of Formation of the Registrant.
*3.2 Amended and Restated Limited Liability Company Agreement of the
Registrant.
*4.1 Declaration of Trust of the Trust.
4.2 Form of Transitional Funding Trust Note (included as Exhibit B to Exhibit
4.3).
4.3 Form of Indenture.
5.1 Opinion of Schiff Hardin & Waite relating to the legality of the
Transitional Funding Trust Notes.
*5.2 Opinion of Richards, Layton & Finger, P.A.
*8.1 Opinion of Mayer, Brown & Platt with respect to material federal tax
matters.
10.1 Form of Sale Agreement.
10.2 Form of Grant Agreement.
10.3 Form of Servicing Agreement.
*10.4 Form of Administration Agreement.
10.5 Form of Remediation Agreement.
23.1 Consent of Schiff Hardin & Waite (included in Exhibit 5.1).
*23.2 Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2).
*23.3 Consent of Mayer, Brown & Platt (included in Exhibit 8.1).
*23.4 Consent of PricewaterhouseCoopers LLP with respect to the Registrant.
*23.5 Consent of PricewaterhouseCoopers LLP with respect to the Trust.
*24.1 Power of Attorney with respect to the Registrant (included on page II-5 of
Amendment No. 1 to the Registration Statement).
*24.2 Power of Attorney with respect to the Trust (included on page II-5 of
Amendment No. 2 to the Registration Statement).
*25 Form T-1.
*99.1 Application for Transitional Funding Order.
*99.2 Transitional Funding Order.
*99.3 Internal Revenue Service Private Letter Ruling pertaining to the Notes.
</TABLE>
- ------------------------
* Previously filed.
<PAGE>
ILLINOIS POWER SPECIAL PURPOSE TRUST
TRANSITIONAL FUNDING TRUST NOTES
ILLINOIS POWER SECURITIZATION LIMITED LIABILITY COMPANY
ILLINOIS POWER COMPANY
UNDERWRITING AGREEMENT
New York, New York
December __, 1998
To the Representatives
named in Schedule I hereto of
the Underwriters named in
Schedule II hereto
Ladies and Gentlemen:
1. INTRODUCTION. Illinois Power Securitization Limited Liability
Company, a special purpose Delaware limited liability company (the "Grantee")
proposes to cause and be sold to the underwriters named in Schedule II hereto
(the "Underwriters"), for whom you are acting as representatives (the
"Representatives"), the principal amount of the notes identified in Schedule I
hereto (the "Notes") to be issued. If the firm or firms listed in Schedule II
hereto include only the firm or firms listed in Schedule I hereto, then the
terms "Underwriters" and "Representatives," as used herein, shall each be deemed
to refer to such firm or firms.
Illinois Power Special Purpose Trust, a Delaware business trust (the "Note
Issuer") was formed pursuant to an amended and restated declaration of trust,
dated as of September 10, 1998, by First Union Trust Company, National
Association, a national banking association, as Delaware Trustee (the "Delaware
Trustee"), and Cynthia G. Steward and Eric B. Weekes, each as a Beneficiary
Trustee (the "Trust Agreement"), and the Notes will be issued pursuant to an
indenture, dated as of December 1, 1998, as supplemented by a first supplemental
indenture or Trust Issuance Certificate (and as amended and supplemented from
time to time, the "Indenture"), by and between the Note Issuer and Harris Trust
and Savings Bank, a banking corporation organized under the laws of the State of
Illinois, as Indenture Trustee (the "Indenture Trustee"). The assets of the
Note Issuer will consist primarily of the Intangible Transition Property
(whether created by the Transitional Funding Order issued by the Illinois
Commerce
<PAGE>
Commission (the "ICC") on September 10, 1998 (the "1998 Funding Order")
or any other Transitional Funding Order) transferred to the Note Issuer pursuant
to the Sale Agreement (as hereinafter defined). Such Intangible Transition
Property was, by virtue of the 1998 Funding Order, granted to and vested in the
Grantee, whose sole member is Illinois Power Company (the "Company"). Pursuant
to an agreement relating to the grant of Intangible Transition Property, dated
as of December __, 1998 (the "Grant Agreement"), by and between the Company and
the Grantee, the Company has confirmed the absolute nature of the ownership of
the Intangible Transition Property in the Grantee. The Intangible Transition
Property will be transferred to the Note Issuer by the Grantee pursuant to an
Intangible Transition Property sale agreement, dated as of December __, 1998
(the "Sale Agreement"), by and between the Grantee and the Note Issuer. Other
Intangible Transition Property may be granted to and vested in the Grantee
pursuant to Subsequent Financing Orders and confirmed by Subsequent Grant
Agreements and transferred to the Note Issuer by the Grantee pursuant to
Subsequent Sale Agreements. Pursuant to the Indenture, the Note Issuer has
granted to the Indenture Trustee, as trustee for the benefit of the holders of
the Notes, all of its right, title and interest in and to the Intangible
Transition Property as security for the Notes. The Intangible Transition
Property will be serviced pursuant to an Intangible Transition Property
servicing agreement, dated as of December __, 1998 (as amended and supplemented
from time to time, the "Servicing Agreement"), by and between the Company, as
servicer, and the Grantee. All of the Grantee's right, title and interest in
and to the Grant Agreement, the Sale Agreement and the Servicing Agreement,
among other things, wil be transferred to the Note Issuer as Related Assets
pursuant to the Sale Agreement.
Capitalized terms used and not otherwise defined herein shall have the
meanings given to them in the Indenture, including Appendix A thereto.
2. REPRESENTATIONS AND WARRANTIES. Each of the Company and the Grantee
represents and warrants to, and agrees with, each Underwriter as set forth below
in this Section 2. Certain terms used in this Section 2 are defined in
paragraph (c) hereof.
(a) If the offering of the Notes is a Delayed Offering (as specified
in Schedule I hereto), paragraph (i) below is applicable and, if the
offering of the Notes is a Non-Delayed Offering (as so specified),
paragraph (ii) below is applicable.
(i) The Grantee and the Notes meet the requirements for the use
of Form S-3 under the Securities Act of 1933 (the "Act"), and the
Grantee has filed with the Securities and Exchange Commission (the
"SEC") a registration statement (the file number of which is set forth
in Schedule I hereto) on such Form, including a basic prospectus, for
registration under the Act of the offering and sale of the Notes. The
Grantee may have filed one or more amendments thereto, and may have
used a Preliminary Final Prospectus, each of which has previously been
furnished to you. Such registration statement, as so amended, has
become effective. The offering of the Notes is a Delayed Offering
and, although the Basic Prospectus may not include all the information
with respect to the Notes
2
<PAGE>
and the offering thereof required by the Act and the rules
thereunder to be included in the Final Prospectus, the Basic
Prospectus includes all such information required by the Act and
the rules thereunder to be included therein as of the Effective
Date. The Grantee will next file with the SEC pursuant to Rules 415
and 424(b)(2) or (5) a final supplement to the form of prospectus
included in such registration statement relating to the Notes and
the offering thereof. As filed, such final prospectus supplement
shall include all required information with respect to the Notes
and the offering thereof and, except to the extent the
Representatives shall agree in writing to a modification, shall be
in all substantive respects in the form furnished to you prior to
the Execution Time or, to the extent not completed at the Execution
Time, shall contain only such specific additional information and
other changes (beyond that contained in the Basic Prospectus and
any Preliminary Final Prospectus) as the Grantee has advised you,
prior to the Execution Time, will be included or made therein.
(ii) The Grantee and the Notes meet the requirements for the use
of Form S-3 under the Act and the Grantee has filed with the SEC a
registration statement (the file number of which is set forth in
Schedule I hereto) on such Form, including a basic prospectus, for
registration under the Act of the offering and sale of the Notes. The
Grantee may have filed one or more amendments thereto, including a
Preliminary Final Prospectus, each of which has previously been
furnished to you. The Note Issuer will next file with the SEC either
(x) a final prospectus supplement relating to the Notes in accordance
with Rules 430A and 424(b)(1) or (4), or (y) prior to the
effectiveness of such registration statement, an amendment to such
registration statement, including the form of final prospectus
supplement. In the case of clause (x), the Grantee has included in
such registration statement, as amended at the Effective Date, all
information (other than Rule 430A Information) required by the Act and
the rules thereunder to be included in the Final Prospectus with
respect to the Notes and the offering thereof. As filed, such final
prospectus supplement or such amendment and form of final prospectus
supplement shall contain all Rule 430A Information, together with all
other such required information, with respect to the Notes and the
offering thereof and, except to the extent the Representatives shall
agree in writing to a modification, shall be in all substantive
respects in the form furnished to you prior to the Execution Time or,
to the extent not completed at the Execution Time, shall contain only
such specific additional information and other changes (beyond that
contained in the Basic Prospectus and any Preliminary Final
Prospectus) as the Grantee has advised you, prior to the Execution
Time, will be included or made therein.
(b) On the Effective Date, the Registration Statement did or will,
and when the Final Prospectus is first filed (if required) in accordance
with Rule 424(b) and on the
3
<PAGE>
Closing Date, the Final Prospectus (and any supplement thereto) will,
comply in all material respects with the applicable requirements of the
Act, the Securities Exchange Act of 1934 (the "Exchange Act") and the
Trust Indenture Act of 1939 (the "Trust Indenture Act") and the
respective rules thereunder; on the Effective Date, the Registration
Statement did not or will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading; on the
Effective Date and on the Closing Date the Indenture did or will comply
in all material respects with the requirements of the Trust Indenture
Act and the rules thereunder; and, on the Effective Date, the Final
Prospectus, if not filed pursuant to Rule 424(b), did not or will not,
and on the date of any filing pursuant to Rule 424(b) and on the Closing
Date, the Final Prospectus (together with any supplement thereto) will
not, include any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that neither the Grantee nor the Company makes any
representations or warranties as to (i) that part of the Registration
Statement which shall constitute the Statements of Eligibility and
Qualification (Forms T-1) under the Trust Indenture Act of the Indenture
Trustee or (ii) the information contained in or omitted from the
Registration Statement or the Final Prospectus (or any supplement
thereto) in reliance upon and in conformity with information furnished
in writing to the Grantee by or on behalf of any Underwriter through the
Representatives specifically for inclusion in the Registration Statement
or the Final Prospectus (or any supplement thereto).
(c) The terms which follow, when used in this Agreement, shall have
the meanings indicated. The term "the Effective Date" shall mean each date
that the Registration Statement and any post-effective amendment or
amendments thereto became or become effective and each date after the date
hereof on which a document incorporated by reference in the Registration
Statement is filed. "Execution Time" shall mean the date and time that
this Agreement is executed and delivered by the parties hereto. "Basic
Prospectus" shall mean the prospectus referred to in paragraph (a) above
contained in the Registration Statement at the Effective Date including, in
the case of a Non-Delayed Offering, any Preliminary Final Prospectus.
"Preliminary Final Prospectus" shall mean any preliminary prospectus
supplement to the Basic Prospectus which describes the Notes and the
offering thereof and is used prior to filing of the Final Prospectus.
"Final Prospectus" shall mean the prospectus supplement relating to the
Notes that is first filed pursuant to Rule 424(b) after the Execution Time,
together with the Basic Prospectus or, if, in the case of a Non-Delayed
Offering, no filing pursuant to Rule 424(b) is required, shall mean the
form of final prospectus relating to the Notes, including the Basic
Prospectus, included in the Registration Statement at the Effective Date.
"Registration Statement" shall mean the registration statement referred to
in paragraph (a) above, including incorporated documents, exhibits and
financial statements, as amended at the Execution Time (or, if not
effective at the Execution Time, in the form in which it shall
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become effective) and, in the event any post-effective amendment thereto
becomes effective prior to the Closing Date (as hereinafter defined),
shall also mean such registration statement as so amended. Such term
shall include any Rule 430A Information deemed to be included therein at
the Effective Date as provided by Rule 430A. "Rule 415," "Rule 424,"
"Rule 430A" and "Regulation S-K" refer to such rules or regulation under
the Act. "Rule 430A Information" means information with respect to the
Notes and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A.
Any reference herein to the Registration Statement, the Basic
Prospectus, any Preliminary Final Prospectus or the Final Prospectus
shall be deemed to refer to and include the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 which were filed under
the Exchange Act on or before the Effective Date of the Registration
Statement or the issue date of the Basic Prospectus, any Preliminary
Final Prospectus or the Final Prospectus, as the case may be; and any
reference herein to the terms "amend," "amendment" or "supplement" with
respect to the Registration Statement, the Basic Prospectus, any
Preliminary Final Prospectus or the Final Prospectus shall be deemed to
refer to and include the filing of any document under the Exchange Act
after the Effective Date of the Registration Statement or the issue date
of the Basic Prospectus, any Preliminary Final Prospectus or the Final
Prospectus, as the case may be, deemed to be incorporated therein by
reference. A "Non-Delayed Offering" shall mean an offering of
securities which is intended to commence promptly after the effective
date of a registration statement, with the result that, pursuant to
Rules 415 and 430A, all information (other than Rule 430A Information)
with respect to the securities so offered must be included in such
registration statement at the effective date thereof. A "Delayed
Offering" shall mean an offering of securities pursuant to Rule 415
which does not commence promptly after the effective date of a
registration statement, with the result that only information required
pursuant to Rule 415 need be included in such registration statement at
the effective date thereof with respect to the securities so offered.
Whether the offering of the Notes is a Non-Delayed Offering or a Delayed
Offering shall be set forth in Schedule I hereto.
(d) PricewaterhouseCoopers LLP, the accountants who certified certain
financial statements of the Grantee and the Note Issuer included in the
Prospectus, are independent public accountants as required by the Act and
the rules and regulations of the SEC thereunder.
(e) The financial statements included or incorporated by reference in
the Prospectus present fairly the financial position and results of
operations of the Grantee and the Note Issuer, respectively, as of the
respective dates and for the respective periods specified and, except as
otherwise stated in the Prospectus, such financial statements have been
prepared in conformity with generally accepted accounting principals
applied on a consistent basis during the periods involved. Neither the
Grantee nor the Note Issuer has any material contingent obligation which is
not disclosed in the Prospectus.
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(f) The Note Issuer has been duly formed and is validly existing as a
Delaware business trust and is in good standing under the laws of the State
of Delaware, with full power and authority to execute, deliver and perform
its obligations under this Agreement, the Sale Agreement, the Indenture and
the Notes.
(g) The Note Issuer is not in violation of the Trust Agreement, or in
default in the performance or observance of any material obligation,
agreement, covenant or condition contained in any material contract, lease,
note or other instrument to which it is a party or by which it may be
bound, or materially in violation of any law, administrative regulation or
administrative, arbitration or court order, except in each case to such
extent as may be set forth in the Prospectus; and the execution and
delivery of the Sale Agreement, and the Indenture and the Notes, the
incurrence of the obligations set forth therein and the consummation of the
transaction therein contemplated will not conflict with or constitute a
breach of, or default under, the Trust Agreement or any mortgage, contract,
lease, note or other instrument to which the Note Issuer is a party or by
which it may be bound, or any law, administrative regulation or
administrative, arbitration or court order.
(h) There is no pending or threatened suit or proceeding before any
court or governmental agency, authority or body or any arbitration
involving the Company or any of its significant subsidiaries or the Note
Issuer required to be disclosed in the Prospectus which is not adequately
disclosed in the Prospectus.
(i) The Indenture has been duly and validly authorized by the
necessary action and duly qualified under the Trust Indenture Act; and the
Indenture has been duly and validly executed and delivered and is a valid
and enforceable instrument in accordance with its terms (subject to
bankruptcy, reorganization, insolvency, moratorium or other similar laws or
equitable principles affecting the enforcement of creditors' rights from
time to time in effect).
(j) The issuance and sale of the Notes in accordance with the terms
of this Agreement have been duly and validly authorized by the necessary
action; the Notes, when duly executed, authenticated and delivered against
payment of the agreed consideration therefor, will be valid and enforceable
obligations in accordance with their terms, entitled to the benefits
provided by the Indenture, and the holders of the Notes will be entitled to
the payment of principal and interest as therein provided; and the Notes
and the Indenture conform to the descriptions thereof contained in the
Prospectus.
Any certificate signed by any officer of the Company or the Grantee and
delivered to you or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company and the Grantee to each Underwriters
as to the matters covered thereby.
3. PURCHASE AND SALE. Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Grantee
will cause to be sold to each
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Underwriter, and each Underwriter agrees, severally and not jointly, to
purchase from the Note Issuer, at the purchase price set forth in Schedule I
hereto the principal amount of the Notes set forth opposite such
Underwriter's name in Schedule II hereto.
4. DELIVERY AND PAYMENT. Delivery of and payment for the Notes shall be
made on the date and at the time specified in Schedule I hereto (or such later
date not later than five business days after such specified date as the
Representatives shall designate), which date and time may be postponed by
agreement between the Representatives and the Grantee or as provided in Section
9 hereof (such date and time of delivery and payment for the Notes being herein
called the "Closing Date"). Delivery of the Notes shall be made to the
Representatives for the respective accounts of the several Underwriters against
payment by the several Underwriters through the Representatives of the purchase
price thereof to the Note Issuer by wire transfer of immediately available
funds. Delivery of the Notes shall be made at such location as the
Representatives shall reasonably designate at least one business day in advance
of the Closing Date. The Notes to be so delivered shall be initially
represented by Notes registered in the name of Cede & Co., as nominee of The
Depository Trust Company ("DTC"). The interests of beneficial owners of the
Notes will be represented by book entries on the records of DTC and
participating members thereof. Definitive Notes will be available only under
limited circumstances.
The Grantee will cause the Note Issuer to have the Notes available for
inspection, checking and packaging by the Representatives in New York, New York,
not later than 1:00 PM Eastern Standard Time on the business day prior to the
Closing Date.
5. COVENANTS.
(a) COVENANTS OF THE GRANTEE. The Grantee covenants and agrees with the
several Underwriters that:
(i) The Grantee will use commercially reasonable efforts to
cause the Registration Statement, if not effective at the Execution
Time, and any amendment thereto, to become effective. Prior to the
termination of the offering of the Notes, the Grantee will not file
any amendment of the Registration Statement or supplement (including
the Final Prospectus or any Preliminary Final Prospectus) to the Basic
Prospectus unless the Grantee has furnished you a copy for your review
prior to filing and will not file any such proposed amendment or
supplement to which you reasonably object. Subject to the foregoing
sentence, the Grantee will cause the Final Prospectus, properly
completed, and any supplement thereto to be filed with the SEC
pursuant to the applicable paragraph of Rule 424(b) within the time
period prescribed and will provide evidence satisfactory to the
Representatives of such timely filing. The Grantee will promptly
advise the Representatives (i) when the Registration Statement, if not
effective at the Execution Time, and any amendment thereto, shall have
become
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<PAGE>
effective, (ii) when the Final Prospectus, and any supplement
thereto, shall have been filed with the SEC pursuant to Rule
424(b), (iii) when, prior to termination of the offering of the
Notes, any amendment to the Registration Statement shall have been
filed or become effective, (iv) of any request by the SEC for any
amendment of the Registration Statement or supplement to the Final
Prospectus or for any additional information, (v) of the issuance
by the SEC of any stop order suspending the effectiveness of the
Registration Statement or the institution or threatening of any
proceeding for that purpose and (vi) of the receipt by the Grantee
of any notification with respect to the suspension of the
qualification of the Notes for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose. The
Grantee will use commercially reasonable efforts to prevent the
issuance of any such stop order and, if issued, to obtain as soon
aspossible the withdrawal thereof.
(ii) If, at any time when a prospectus relating to the Notes is
required to be delivered under the Act, any event occurs as a result
of which the Final Prospectus as then supplemented would include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if it
shall be necessary to amend the Registration Statement or supplement
the Final Prospectus to comply with the Act or the Exchange Act or the
respective rules thereunder, the Grantee promptly will (i) prepare and
file with the SEC, subject to the second sentence of paragraph (a) of
this Section 5, an amendment or supplement which will correct such
statement or omission or effect such compliance and (ii) supply any
supplemented Prospectus to you in such quantities as you may
reasonably request.
(iii) As soon as practicable, the Grantee will cause Note Issuer
to make generally available to the Noteholders and to the
Representatives an earnings statement or statements of the Note Issuer
which will satisfy the provisions of Section 11(a) of the Act and Rule
158 under the Act.
(iv) The Grantee will furnish to the Representatives and counsel
for the Underwriters, without charge, copies of the Registration
Statement (including exhibits thereto) and, so long as delivery of a
prospectus by an Underwriter or dealer may be required by the Act, as
many copies of any Preliminary Final Prospectus and the Final
Prospectus and any supplement thereto as the Representatives may
reasonably request. The Grantee shall furnish or cause to be
furnished to the Representatives copies of all reports on Form SR
required by Rule 463 under the Act. The Grantee will pay the expenses
of printing or other production of all documents relating to the
offering.
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<PAGE>
(v) The Grantee will arrange for the qualification of the Notes
for sale under the laws of such jurisdictions as the Representatives
may designate, will maintain such qualifications in effect so long as
required for the distribution of the Notes and will arrange for the
determination of the legality of the Notes for purchase by
institutional investors; provided that in no event shall the Grantee
be obligated to qualify to do business in any jurisdiction where it is
not now so qualified or to take any action that would subject it to
service of process in suits, other than those arising out of the
offering or sale of the Notes, in any jurisdiction where it is not now
so subject.
(vi) Until the business date set forth on Schedule I hereto, the
Grantee will not, without the consent of the Representatives, offer,
sell or contract to sell, or otherwise dispose of, directly or
indirectly, or announce the offering of, any asset-backed securities
of a trust or other special purpose vehicle (other than the Notes).
(vii) For a period from the date of this Agreement until the
retirement of the Notes, or until such time as the Underwriters shall
cease to maintain a secondary market in the Notes, whichever occurs
first, the Grantee will deliver to the Representatives the annual
statements of compliance and the annual independent auditor's
servicing reports furnished to the Grantee Trustee, the Note Issuer or
the Indenture Trustee pursuant to the Servicing Agreement or the
Indenture, as applicable, as soon as such statements and reports are
furnished to the Grantee, Note Issuer or the Indenture Trustee.
(viii) So long as any of the Notes are outstanding, the
Grantee will furnish to the Representatives, to the extent not
provided by the Company pursuant to clause (b)(iii) below, (i) as soon
as available, a copy of each report of the Grantee or the Note Issuer
filed with the SEC under the Exchange Act, or mailed to Noteholders,
(ii) a copy of any filings made by the Grantee or the Note Issuer with
the ICC pursuant to the 1998 Funding Order, and (iii) from time to
time, any information concerning the Company, the Grantee, the Note
Issuer, as the Representatives may reasonably request.
(ix) To the extent, if any, that any rating necessary to satisfy
the condition set forth in Section 6(m) of this Agreement is
conditioned upon the furnishing of documents or the taking of other
actions by the Grantee on or after the Closing Date, the Grantee shall
furnish such documents and take such other actions.
(b) COVENANTS OF THE COMPANY. The Company covenants and agrees with
the several Underwriters that, to the extent that the Note Issuer has not
already performed such act pursuant to Section 5(a):
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<PAGE>
(i) The Company will use commercially reasonable efforts to
cause the Registration Statement, if not effective at the Execution
Time, and any amendment thereto, to become effective. The Company
will use commercially reasonable efforts to prevent the issuance by
the SEC of any stop order suspending the effectiveness of the
Registration Statement and, if issued, to obtain as soon as possible
the withdrawal thereof.
(ii) The Company will apply the proceeds of the issuance and sale
of the Notes for the purposes described in the Prospectus.
(iii) Until the business date set forth on Schedule I hereto, the
Company will not, without the consent of the Representatives, offer,
sell or contract to sell, or otherwise dispose of, directly or
indirectly, or announce the offering of, any asset-backed securities
of a trust or other special purpose vehicle (other than the Notes).
(iv) So long as any of the Notes are outstanding and the Company
is the Servicer, the Company will furnish to the Representatives (i)
as soon as available, a copy of each report of the Company, the
Grantee or the Note Issuer filed with the SEC under the Exchange Act,
or mailed to Noteholders, (ii) a copy of any filings with the ICC by
the Company, the Grantee or the Note Issuer pursuant to the 1998
Funding Order, and (iii) from time to time, any information concerning
the Company, the Grantee or the Note Issuer, as the Representatives
may reasonably request.
(v) To the extent, if any, that any rating necessary to satisfy
the condition set forth in Section 6(m) of this Agreement is
conditioned upon the furnishing of documents or the taking of other
actions by the Company on or after the Closing Date, the Company shall
furnish such documents and take such other actions.
(vi) The Company recognizes and agrees that a substantial
impairment of the rights of Holders with respect to the collection of
IFCs and payments on the Notes, arising from a declaration of
invalidity of the Amendatory Act and/or the Funding Law or for any
other reason, occurring after the Company and its affiliates received
the proceeds of such Notes, would not be equitable. The Company
agrees to take any and all actions reasonably necessary to preserve
the rights of Holders with respect to payments on the Notes out of the
amounts represented by IFCs or their equivalent, including, but not
limited to, (i) making appropriate filings with the State of Illinois,
the ICC or other regulatory bodies to defend, preserve and create on
behalf of Holders the right to receive payments as provided in the
Notes and (ii) so long as the 1998 Funding Order remains in effect,
continuing to deduct and pay over to the Servicer for the benefit of
the
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<PAGE>
Note issuer all IFCs and IFC Payments or equivalent revenues
received by the Company notwithstanding any declaration of
invalidity of the Amendatory Act and/or the Funding Law.
(vii) The Initial IFC Tariff has been calculated in accordance
with the 1998 Funding Order.
6. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITERS. The obligations of
the Underwriters to purchase the Notes shall be subject to the accuracy of the
representations and warranties on the part of the Grantee and the Company
contained herein as of the Execution Time and the Closing Date, on the part of
the Grantee contained in Article III of the Sale Agreement and on the part of
the Company contained in Article III of the Grant Agreement and in Section 6.01
of the Servicing Agreement as of the Closing Date (which representations and
warranties are hereby incorporated herein as if set forth in full),to the
accuracy of the statements in the Notes pursuant to the provisions hereof, to
the performance by the Grantee, the Company and the Note Issuer of their
obligations hereunder and to the following additional conditions precedent:
(a) If the Registration Statement has not become effective prior to
the Execution Time, unless the Representatives agree in writing to a later
time, the Registration Statement will become effective not later than (i)
6:00 PM Eastern Standard Time, on the date of determination of the public
offering price, if such determination occurred at or prior to 3:00 PM
Eastern Standard Time on such date, or (ii) 12:00 Noon Eastern Standard
Time on the business day following the day on which the public offering
price was determined, if such determination occurred after 3:00 PM Eastern
Standard Time on such date; if filing of the Final Prospectus, or any
supplement thereto, is required pursuant to Rule 424(b), the Final
Prospectus, and any such supplement, shall have been filed in the manner
and within the time period required by Rule 424(b); and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or
threatened.
(b) The Representatives shall have received an opinion of Schiff
Hardin & Waite, counsel for the Company, the Grantee and the Note Issuer,
dated the Closing Date, substantially in the form of Exhibit A hereto.
(c) The Representatives shall have received an opinion letter of, or
a reliance letter thereon from, Schiff Hardin & Waite, counsel to the Note
Issuer, dated the Closing Date, in form and substance reasonably
satisfactory to the Representatives, required to be delivered by such
counsel pursuant to the requirements of clauses (3) and (8) of Section 2.10
of the Indenture.
(d) The Representatives shall have received (i) opinion letters of,
or a reliance letter or letters thereon from, Richards, Layton and Finger,
P.A., special Delaware
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counsel to the Grantee and the Note Issuer, dated the Closing Date, in
form and substance reasonably satisfactory to the Representatives, as to
matters relating to the Grantee and the Note Issuer and the
transactions contemplated hereby, respectively, and (ii) an opinion of
Richards, Layton & Finger, P.A., counsel to the Delaware Trustee, dated
the Closing Date, in form and substance reasonably satisfactory to the
Representatives, to the effect that:
(i) the Delaware Trustee is validly existing as a national
banking association in good standing under the laws of the State of
Delaware and of the federal laws of the United States of America, with
full corporate trust power and authority to enter into and perform its
obligations as Delaware Trustee under the Trust Agreement, the Sale
Agreement and the Indenture; and
(ii) the Trust Agreement has been duly authorized, executed and
delivered by the Delaware Trustee and constitutes a legal, valid and
binding agreement enforceable against the Delaware Trustee in
accordance with its terms (subject, as to enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium or other
similar laws or equitable principles affecting creditors' rights
generally from time to time in effect).
(e) The Representatives shall have received an opinion of Seward &
Kissel, counsel to the Indenture Trustee, dated the Closing Date, in form
and substance reasonably satisfactory to the Representatives, to the effect
that:
(i) the Indenture Trustee is validly existing as a banking
corporation in good standing under the laws of Illinois;
(ii) the Indenture has been duly authorized, executed and
delivered by the Indenture Trustee and constitutes the legal, valid
and binding agreement enforceable against the Indenture Trustee in
accordance with its terms (subject, as to enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium or other
similar laws or equitable principles affecting creditors' rights
generally from time to time in effect); and
(iii) the Indenture Trustee has duly executed and authenticated
the Notes issued on the Closing Date on behalf of the Note Issuer.
(f) The Representatives shall have received from Brown & Wood LLP,
counsel for the Underwriters, such opinion or opinions, dated the Closing
Date, with respect to the issuance and sale of the Notes, the Indenture,
the Registration Statement, the Final Prospectus (together with any
supplement thereto) and other related matters as the Representatives may
reasonably require, and the Company, the Grantee and the Note
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Issuer shall have furnished to such counsel such documents as they
request for the purpose of enabling them to pass upon such matters.
(g) The Representatives shall have received a certificate of the
Grantee, signed by the Sole Member or any Manager of the Grantee, including
the Independent Manager of the Grantee, dated the Closing Date, to the
effect that the signers of such certificate have carefully examined the
Registration Statement, the Final Prospectus, any supplement to the Final
Prospectus and this Agreement and that:
(i) the representations and warranties of the Grantee in this
Agreement and in the Sale Agreement are true and correct in all
material respects on and as of the Closing Date with the same effect
as if made on the Closing Date, and the Grantee and the Note Issuer
have complied with all the agreements and satisfied all the conditions
on each of their part to be performed or satisfied at or prior to the
Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Grantee's knowledge,
threatened; and
(iii) since the dates as of which information is given in the
Final Prospectus (exclusive of any supplement thereto), there has been
no material adverse change in (A) the condition (financial or other),
prospects, earnings, business or properties of the Grantee or the Note
Issuer, whether or not arising from transactions in the ordinary
course of business, or (B) the Intangible Transition Property or any
right related thereto under the Funding Law or the 1998 Funding Order,
except as set forth in or contemplated in the Final Prospectus
(exclusive of any supplement thereto).
(h) The Representatives shall have received a certificate of the
Company, signed by the Chief Executive Officer, the President or a
Vice-President and the principal financial or accounting officer of the
Company, dated the Closing Date, to the effect that the signers of such
certificate have carefully examined the Registration Statement, the
Final Prospectus, any supplement to the Final Prospectus and this
Agreement and that:
(i) the representations and warranties of the Company in this
Agreement, the Grant Agreement, the Servicing Agreement, the
Administration Agreement and the Remediation Agreement are true and
correct in all material respects on and as of the Closing Date with
the same effect as if made on the Closing Date, and the Company has
complied in all material respects with all the agreements and
satisfied all the conditions on its part to be performed or satisfied
at or prior to the Closing Date; provided, however, that the execution
of each certificate by any of said individuals on behalf of the
Company shall not be
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deemed to be the expression of any legal opinion or opinions by any of
said individuals;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Company's knowledge,
threatened; and
(iii) since the dates as of which information is given in the
Final Prospectus (exclusive of any supplement thereto), there has been no
material adverse change in (A) the condition (financial or other),
prospects, earnings, business or properties of the Company and its
subsidiaries taken as a whole, whether or not arising from transactions
contemplated by the Final Prospectus or in the ordinary course of business,
or (B) the Intangible Transition Property, except as set forth in or
contemplated in the Final Prospectus (exclusive of any supplement thereto).
(i) At the Closing Date, PricewaterhouseCoopers LLP shall have
furnished to the Representatives (i) a letter or letters (which may refer
to letters previously delivered to one or more of the Representatives),
dated as of the Closing Date, in form and substance satisfactory to the
Representatives, confirming that they are independent accountants within
the meaning of the Act and the Exchange Act and the respective applicable
published rules and regulations thereunder and stating in effect that they
have performed certain specified procedures as a result of which they
determined that certain information of an accounting, financial or
statistical nature (which is limited to accounting, financial or
statistical information derived from the general accounting records of the
Company and its subsidiaries) set forth in the Registration Statement and
the Final Prospectus, including information specified by the Underwriters
and set forth under the captions "Prospectus Summary," "Description of the
Intangible Transition Property," "The Servicer" and "Description of the
Notes" in the Final Prospectus, agrees with the accounting records of the
Company and its subsidiaries, excluding any questions of legal
interpretation, and (ii) the opinion or certificate, dated as of the
Closing Date, in form and substance satisfactory to the Representatives,
satisfying the requirements of Section 2.10(9) of the Indenture.
References to the Final Prospectus in this paragraph (i) include any
supplement thereto at the date of the letter.
In addition, except as provided in Schedule I hereto, at the Execution
Time, PricewaterhouseCoopers LLP shall have furnished to the
Representatives a letter or letters, dated as of the Execution Time, in
form and substance satisfactory to the Representatives, to the effect set
forth above.
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(j) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Final Prospectus (exclusive of any supplement
thereto), there shall not have been any change, or any development
involving a prospective change, in or affecting either (i) the business,
properties or financial condition of the Company, the Grantee or the Note
Issuer, or (ii) the Intangible Transition Property, the Notes, the 1998
Funding Order or the Funding Law, the effect of which is, in the case of
either (i) or (ii) above, in the judgment of the Representatives, so
material and adverse as to make it impractical or inadvisable to proceed
with the offering or delivery of the Notes as contemplated by the
Registration Statement (exclusive of any amendment thereof) and the Final
Prospectus (exclusive of any supplement thereto).
(k) The Representatives shall have received on the Closing Date an
opinion letter or letters, portions of which may be delivered by Schiff
Hardin & Waite, counsel to the Company, the Grantee and the Note Issuer,
and portions of which may be delivered by Richards, Layton & Finger, P.A.,
special Delaware counsel to the Grantee and the Note Issuer, dated the
Closing Date, in form and substance reasonably satisfactory to the
Representatives, (i) to the effect that a bankruptcy court would conclude
that, if the Company is deemed to have received some interest in the
Intangible Transition Property, that interest was transferred by the
Company to the Grantee as an absolute transfer (as in a true sale), and no
interest in or title to the Intangible Transition Property shall be part of
the Company's estate in the event of a bankruptcy petition by or against
the Company under any bankruptcy law; (ii) to the effect that a court would
not order the substantive consolidation of the assets and liabilities of
the Grantee with those of the Company in the event of a bankruptcy,
reorganization or other insolvency proceeding involving the Company; (iii)
to the effect a federal bankruptcy court or another federal court would
hold that Delaware law (and not United States federal law) governs the
determination of whether a voluntary bankruptcy petition filed on behalf of
the Grantee has been duly authorized; (iv) to the effect that if properly
presented to a Delaware court, a Delaware court applying Delaware law would
conclude that (A) pursuant to Section 2.7(b) of the Operating Agreement of
the Grantee, in order for a person to initiate any Event of Bankruptcy (as
defined in the Operating Agreement) with respect to the Grantee or take any
action in furtherance of any such Event of Bankruptcy, the affirmative vote
of all of the Managers (including the Independent Manager (as defined in
the Operating Agreement)) is required, and (B) such provision, contained in
Section 2.7(b) of the Operating Agreement, that requires the affirmative
vote o all of the Managers (including the Independent Manager), constitutes
a legal, valid and binding agreement of the Sole Member and is enforceable
against the Sole Member, in accordance with its terms; and (v) the
Operating Agreement constitutes a legal, valid and binding agreement of the
Sole Member thereunder, and is enforceable against the Sole Member in
accordance with its terms.
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(l) The Representatives shall have received on the Closing Date an
opinion letter or letters of Schiff Hardin & Waite, counsel to the Company,
the Grantee and the Note Issuer, dated the Closing Date, in form and
substance reasonably satisfactory to the Representatives, to the effect
that, but subject to the qualifications, limitations, assumptions and
analysis therein set forth, a reviewing court, in a properly prepared and
presented case: (i) would conclude that, absent a demonstration by the
State of Illinois (the "State") that an impairment is necessary to further
a significant and legitimate public purpose, the Noteholders (or the
Indenture Trustee acting on their behalf) could challenge successfully
under Article I, Section 10 of the United States Constitution (the
"Contract Clause") the constitutionality of any law passed by the State
legislature determined by such court to limit, alter, impair or reduce the
value of the Intangible Transition Property or the IFCs so as to cause an
impairment prior to the time that the Notes are fully paid and discharged;
(ii) would conclude that any attempt by citizens of the State to initiative
changes to the Amendatory Act determined by such court to limit, alter,
impair or reduce the value of the Intangible Transition Property or the
IFCs would be invalid; (iii) would conclude that under the Funding Law the
ICC would be prohibited from taking any action subsequent to the 1998
Funding Order becoming final determined by such court to reduce, postpone,
impair or terminate the value of the Intangible Transition Property or the
IFCs; (iv) should conclude that permanent injunctive relief is available,
pursuant to the Contract Clause, to prevent implementation of legislation
hereafter passed by the Illinois legislature determined by such court to
limit, alter, impair or reduce the value of the Intangible Transition
Property or the IFCs so as to cause an impairment; and although sound and
substantial arguments support the granting of preliminary injunctive
relief, the decision to o so will be in the discretion of the court
requested to take such action, which will be exercised on the basis of the
considerations discussed in such opinion; (v) in the event that a provision
of the Amendatory Act were hereafter declared to be invalid by a court, a
reviewing court should hold that the Intangible Transition Property remains
valid and vested in the Grantee or its assignees and the Noteholders would
continue to be secured thereby; (vi) if a reviewing court were to
determine, after such a declaration, that the Intangible Transition
Property would remain valid and so vested and that the Noteholders would
continue to be secured thereby, such court should also determine, for the
same reasons, that the substance of the State Pledge would continue in
effect for the benefit of the Noteholders; (vii) a reviewing court which
determines that the substance of the State Pledge continues in effect for
the benefit of the Noteholders should also determine, for the same reasons,
that the ICC could not take any action determined by such court to limit,
alter, impair or reduce materially the value of the Intangible Transition
Property or the IFCs, except for such actions, if any, which would be taken
by the State without violating the State Pledge; and (viii) notwithstanding
a judicial declaration of the invalidity of the Amendatory Act, the 1998
Funding Order would remain in effect and the Intangible Transition Property
would continue to be valid and enforceable, at least against the Company
and its successors and assigns (including a trustee in bankruptcy), unless
and until the 1998 Funding Order were modified by the
16
<PAGE>
ICC or a court in subsequent proceedings initiated to vacate, amend or
otherwise modify the 1998 Funding Order; however, notwithstanding such a
declaration, it would be possible to seek a stay of any decision which
vacates, amends or otherwise modifies the 1998 Funding Order in a manner
adversely affecting the payment of the IFCs pending appellate review of
such decision; and while sound and substanial arguments support the
granting of such a stay, the decision to do so will be in the discretion
of the court requested to take such an action, which will be exercised
on the basis of the factors discussed in such opinion.
(m) The Notes shall have been rated in the highest long-term rating
category by each of the Rating Agencies and on or after the date hereof (i)
no downgrade shall have occurred in the rating accorded to the debt
securities of the Company by any Rating Agency, and (ii) no such
organization shall have publicly announced that it has under surveillance
or review, with possible negative implications, its rating of any of the
Company's debt securities.
(n) On or prior to the Closing Date, the Grantee shall have delivered
to the Representatives evidence, in form and substance reasonably
satisfactory to the Representatives, of compliance with Section 2.10 of the
Indenture, together with such reliance letters as the Representatives shall
request.
(o) On or prior to the Closing Date, the Grantee shall have delivered
to the Representatives evidence, in form and substance reasonably
satisfactory to the Representatives, that appropriate filings have been,
are being or will be made, as applicable, pursuant to Section 3.08 of the
Sale Agreement and in accordance with the Funding Law and other applicable
law reflecting the Note Issuer's first priority perfected ownership
interest in the Intangible Transition Property.
(p) On or prior to the Closing Date, the Grantee shall have delivered
to the Representatives evidence, in form and substance reasonably
satisfactory to the Representatives, that appropriate filings have been,
are being or will be made, as applicable, pursuant to Section 18-104(h) of
the Funding Law.
(q) The Representatives shall have received an opinion, or reliance
letter thereon, from Mayer Brown & Platt, tax counsel to the Note Issuer,
substantially in the form of Exhibit 8.1 to the Registration Statement.
(r) Prior to the Closing Date, the Company, the Grantee and the Note
Issuer shall have furnished to the Representatives such further
information, certificates, opinions and documents as the Representatives
may reasonably request.
If any of the conditions specified in this Section 6 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or if
any of the opinions and
17
<PAGE>
certificates mentioned above or elsewhere in this Agreement shall not be in
all material respects reasonably satisfactory in form and substance to the
Representatives and counsel for the Underwriters, this Agreement and all
obligations of the Underwriters hereunder may be canceled at, or at any time
prior to, the Closing Date by the Representatives. Notice of such
cancellation shall be given to the Grantee and the Note Issuer in writing or
by telephone or telegraph confirmed in writing.
The documents required to be delivered by this Section 6 shall be delivered
at the offices of Schiff Hardin & Waite, 7200 Sears Tower, Chicago, Illinois, on
the Closing Date.
7. EXPENSES.
(a) The Company and the Grantee will pay, or cause to be paid, all
expenses incident to the performance of their respective obligations and those
of the Note Issuer under this Agreement, including without limitation,
(i) expenses incident to the word processing, printing, reproduction and
distribution of the registration statement as originally filed with the SEC and
each amendment thereto, Preliminary Final Prospectuses and the Final Prospectus
(including any amendments and supplements thereto), (ii) the fees and
disbursements of the Indenture Trustee, the Delaware Trustee, the Beneficiary
Trustees and their respective counsel, (iii) the fees and disbursements of
counsel to the Company, the Grantee, the Note Issuer, and the independent
public accountants of the Company, the Grantee and the Note Issuer, (iv) the
fees charged by the Rating Agencies in connection with the rating of the Notes,
(v) the fees of DTC in connection with the book-entry registration of the Notes,
and (vi) expenses incurred in distributing Preliminary Final Prospectuses and
the Final Prospectus (including any amendments and supplements thereto) by the
Underwriters. The Company and the Grantee will also pay all reasonable fees and
disbursements of Underwriters' counsel, and will reimburse the Underwriters for
any expenses incurred by the Underwriters pursuant to Section 5(a)(v) hereof in
connection with the qualification of the Notes for sale under the laws of such
jurisdictions in the United States as the Representatives may designate,
together with costs and expenses in connection with any filing with the National
Association of Securities Dealers with respect with the transactions
contemplated hereby.
(b) If the sale of the Notes provided for herein is not consummated
because any condition to the obligations of the Underwriters set forth in
Section 6 hereof is not satisfied, because of any termination pursuant to
Section 10 hereof or because of any refusal, inability or failure on the part
of the Company, the Grantee or the Note Issuer to perform any agreement
herein or comply with any provision hereof other than by reason of a default
(including under Section 9) by any of the Underwriters, the Company and the
Grantee will, jointly and severally, reimburse the Underwriters upon demand
for all out-of-pocket expenses (including reasonable fees and disbursements
of counsel) that shall have been incurred by them in connection with the
proposed purchase and sale of the Notes.
18
<PAGE>
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company and the Grantee will, jointly and severally, indemnify and
hold harmless each Underwriter, the directors, officers, members, employees and
agents of each Underwriter, and each person who controls any Underwriter within
the meaning of either the Act or the Exchange Act against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of them
may become subject under the Funding Law, the Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of, directly or indirectly, (i)(A) the complete or partial
judicial invalidation of the Amendatory Act and/or the Funding Law, [or (B) any
breach of any representation and warranty made herein or in any of the Basic
Documents by or on behalf of the Company, the Grantee or the Note Issuer,] or
(ii) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement for the
registration of the Notes as originally filed or in any amendment thereof, or in
the Basic Prospectus, any Preliminary Final Prospectus or the Final Prospectus,
or in any amendment thereof or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and will reimburse
each such indemnified party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that neither
the Company nor the Grantee will be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon any
such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to the Grantee or the Company by or on behalf of any
Underwriter through the Representatives specifically for inclusion therein;
provided further, that, in the case of any indemnification under clause (ii)
above, with respect to any untrue statement or omission of material fact made in
any Preliminary Final Prospectus, the indemnity agreement contained in this
Section 8(a) shall not inure to the benefit of any Underwriter or any person
controlling such Underwriter from whom the person asserting any such loss,
claim, damage or liability purchased the Notes that are the subject thereof, to
the extent that any such loss, claim, damage or liability of such Underwriter
occurs under the circumstance where it shall have been determined by a court of
competent jurisdiction by final and nonappealable judgment that (A) the Company
or the Grantee had previously furnised copies of the Final Prospectus to the
Representatives, (B) delivery of the Final Prospectus was required by the Act to
be made to such person, (C) the untrue statement or omission of a material fact
contained in the Preliminary Final Prospectus was corrected in the Final
Prospectus and (D) there was not sent or given to such person, at or prior to
the written confirmation of the sale of such Notes to such person, a copy of the
Final Prospectus. This indemnity agreement will be in addition to any liability
which the Company and the Grantee may otherwise have.
19
<PAGE>
(b) Each Underwriter severally agrees to indemnify and hold harmless the
Company and the Grantee, each of their directors, each of their officers who
signs the Registration Statement, and each person who controls the Company or
the Grantee within the meaning of either the Act or the Exchange Act, to the
same extent as the foregoing indemnity from the Company and the Grantee to each
Underwriter, but only with reference to written information relating to such
Underwriter furnished to the Grantee or the Company by or on behalf of such
Underwriter through the Representatives specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which any Underwriter may otherwise have. The
Grantee and the Company acknowledge that the statements set forth in the last
paragraph of the cover page, under the heading "Underwriting" or "Plan of
Distribution" in any Preliminary Final Prospectus or the Final Prospectus
constitute the only information furnished in writing by or on behalf of the
several Underwriters for inclusion in the documents referred to in the foregoing
indemnity, and you, as the Representatives, confirm that such statements are
correct.
(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
reasonably satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ
separate counsel (including local counsel), and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel if (i) the
use of counsel chosen by the indemnifying party to represent the indemnified
party would present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified partes which are different from or additional to those
available to the indemnifying party, (iii) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of the institution
of such action or (iv) the indemnifying party shall authorize the indemnified
party to employ separate counsel at the expense of the indemnifying party. It
is understood that the indemnifying party shall not, in connection with any
proceeding
20
<PAGE>
or related proceedings in the same jurisdiction, be liable for the reasonable
fees and expenses of more than one separate firm for all such indemnified
parties. An indemnifying party will not, without the prior written consent
of the indemnified parties, settle or compromise or consent to the entry of
any judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from
all liability arising out of such claim, action, suit or proceeding and (ii)
does not include a statement as to or an admission of fault, culpability or
failure to act, by or on behalf of any indemnified party.
(d) In the event that the indemnity provided in paragraph (a) or (b) of
this Section 8 is unavailable to or insufficient to hold harmless an indemnified
party for any reason, the Company, the Grantee and the Underwriters agree to
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating or
defending same) (collectively "Losses") to which the Grantee and one or more of
the Underwriters may be subject in such proportion as is appropriate to reflect
the relative benefits received by the Grantee and by the Underwriters from the
offering of the Notes; provided, however, that in no case shall any Underwriter
(except as may be provided in any agreement among underwriters relating to the
offering of the Notes) be responsible for any amount in excess of the
underwriting discount or commission applicable to the Notes purchased by such
Underwriter hereunder. If the allocation provided by the immediately preceding
sentence is unavailable for any reason, the Company, the Grantee and the
Underwriters shall contribute in such proportion as is appropriate to reflect
not only such relative benefits but also the relative fault of the Company, the
Grantee and the Underwriters respectively in connection with the statements or
omissions which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Grantee shall be deemed to be equal to
the total net proceeds from the offering (before deducting expenses) of the
Notes (which shall be equal to the net proceeds from the sale of the Notes to
the Note Issuer (before deducting expenses)), and benefits received by the
Underwriters shall be deemed to be equal to the total underwriting discounts and
commissions, in each case as set forth on the cover page of the Final
Prospectus. Relative fault shall be determined by reference to whether any
alleged untrue statement or omission relates to information provided by the
Company or the Grantee, or the Undrwriters, as the case may be. The Company,
the Grantee and the Underwriters agree that it would not be just and equitable
if contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (d), no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section 8, each person
who controls an Underwriter within the meaning of either the Act or the Exchange
Act and each director, officer, employee and agent of an Underwriter shall have
the same rights to contribution as such Underwriter, and each person who
controls the
21
<PAGE>
Grantee or the Company within the meaning of either the Act or the Exchange
Act, each officer of the Grantee or the Company who shall have signed the
Registration Statement and each director of the Grantee or the Company shall
have the same rights to contribution as the Grantee or the Company, subject
in each case to the applicable terms and conditions of this paragraph (d).
The Underwriters' obligations in this paragraph (d) to contribute are several
in proportion to their respective underwriting obligations and not joint.
9. DEFAULT BY AN UNDERWRITER. If any one or more Underwriters shall fail
to purchase and pay for any of the Notes agreed to be purchased by such
Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the nondefaulting Underwriters shall be obligated severally to take
up and pay for (in the respective proportions which the amount of Notes set
forth opposite their names in Schedule II hereto bears to the aggregate amount
of Notes set forth opposite the names of all the remaining Underwriters) the
Notes which the defaulting Underwriter or Underwriters agreed but failed to
purchase; provided, however, that in the event that the aggregate amount of
Notes which the defaulting Underwriter or Underwriters agreed but failed to
purchase shall exceed 10% of the aggregate amount of Notes set forth in Schedule
II hereto, the nondefaulting Underwriters shall have the right to purchase all,
but shall not be under any obligation to purchase any, of the Notes, and if such
nondefaulting Underwriters do not purchase all the Notes, this Agreement will
terminate without liability to any nondefaulting Underwriter, the Grantee or the
Company. In the event of a default by any Underwriter as set forth in this
Section 9, the Closing Date shall be postponed for such period, not exceeding
seven days, as the Representatives shall determine in order that the required
changes in the Registration Statement and the Final Prospectus or in any other
documents or arrangements may be effected. Nothing contained in this Agreement
shall relieve any defaulting Underwriter of its liability, if any, to the
Grantee and the Company and any nondefaulting Underwriter for damages occasioned
by its default hereunder.
10. TERMINATION. This Agreement shall be subject to termination in the
absolute discretion of the Representatives, by notice given to the Company and
the Grantee prior to delivery of and payment for the Notes, if prior to such
time (i) there shall have occurred any change, or any development involving a
prospective change, in or affecting either (A) the business, properties or
financial condition of the Grantee or the Company or (B) the Intangible
Transition Property, the Notes, the 1998 Funding Order or the Funding Law, the
effect of which, in the judgment of the Representatives, materially impairs the
investment quality of the Notes or makes it impractical or inadvisable to market
the Notes, (ii) trading in the Company's Common Stock shall have been suspended
by the SEC or the New York Stock Exchange or trading in securities generally on
the New York Stock Exchange shall have been suspended or limited or minimum
prices shall have been established on such Exchange, (iii) a banking moratorium
shall have been declared either by federal, New York State or Illinois State
authorities or (iv) there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a national emergency or war or
other calamity or crisis the effect of which on financial markets is
22
<PAGE>
such as to make it, in the judgment of the Representatives, impracticable or
inadvisable to proceed with the offering or delivery of the Notes as
contemplated by the Final Prospectus (exclusive of any supplement thereto).
11. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. The respective agreements,
representations, warranties, indemnities and other statements of the Company or
its officers, the Grantee or its officers, the Note Issuer or its officers and
of the Underwriters set forth in or made pursuant to this Agreement will remain
in full force and effect, regardless of any investigation made by or on behalf
of any Underwriter or of the Company, the Grantee, the Note Issuer or any of the
officers, directors or controlling persons referred to in Section 8 hereof, and
will survive delivery of and payment for the Notes. The provisions of Sections
7 and 8 hereof shall survive the termination or cancellation of this Agreement
and the complete or partial judicial invalidation of the Amendatory Act and/or
the Funding Law.
12. NOTICES. All communications hereunder will be in writing and may be
given by United States mail, courier service, telegram, telex, telemessage,
telecopy, telefax, cable or facsimile (confirmed by telephone or in writing in
the case of notice by telegram, telex, telemessage, telecopy, telefax, cable or
facsimile) or any other customary means of communication, and any such
communication shall be effective when delivered, or if mailed, three days after
deposit in the United States mail with proper postage for ordinary mail prepaid,
and if sent to the Representatives, to them at the address specified in Schedule
I hereto; and if sent to the Company, to it at Illinois Power Company, the sole
member of Illinois Power Securitization Limited Liability Company, 500 South
27th Street, Decatur, IL 62521, Attention: __________; and if sent to the
Grantee, to it at Illinois Power Securitization Limited Liability Company, 500
South 27th Street, Decatur, IL 62521, Attention: __________. The parties
hereto, by notice to the others, may designate additional or different addresses
for subsequent communications.
13. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and no
other person will have any right or obligation hereunder.
14. APPLICABLE LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of New York.
15. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be deemed an original, which taken together
shall constitute one and the same instrument.
23
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Company, the Grantee and the several Underwriters.
Very truly yours,
ILLINOIS POWER COMPANY,
By:
----------------------------------------
Name:
Title:
ILLINOIS POWER SECURITIZATION LIMITED
LIABILITY COMPANY,
By:
----------------------------------------
Name:
Title:
The foregoing Underwriting
Agreement is hereby confirmed
and accepted as of the date
specified in Schedule I hereto.
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By:
----------------------------------------
Name:
Title:
For itself and the other several Underwriters,
if any, named in Schedule II to the foregoing
Agreement.
24
<PAGE>
SCHEDULE I
Underwriting Agreement dated December ___, 1998
Registration Statement No. 333-63537
Representative(s):
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower
New York, New York 10281
Title, Purchase Price and Description of Notes:
Title: $864,000,000 Illinois Power Special Purpose Trust
Transitional Funding Trust Notes, Series 1998-1
Principal amount, Price to Public, Underwriting Discounts and
Commissions and Proceeds to Trust:
<TABLE>
<CAPTION>
TOTAL PRINCIPAL PRICE TO PUBLIC UNDERWRITING PROCEEDS TO TRUST
AMOUNT OF CLASS DISCOUNTS AND
COMMISSIONS
<S> <C> <C> <C> <C>
$ % % %
Per Class A-1 Note
Per Class A-2 Note
Per Class A-3 Note
Per Class A-4 Note
Per Class A-5 Note
Per Class A-6 Note
Per Class A-7 Note ----------- ----------- ---------- -----------
Total $ % % %
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
</TABLE>
<PAGE>
Original Issue Discount (if any): $__________
Redemption provisions: Optional Redemption and Mandatory Redemption as
set forth in Article X of the Indenture
Other provisions:
Closing Date, Time and Location: December ___, 1998, ___ AM,
Central Standard Time,
Chicago, IL
Type of Offering: Delayed Offering
Date referred to in Section 5(a)(vi) and 5(b)(ii) after which the Company and
the Note Issuer may offer or sell asset-backed securities in a trust or special
purpose vehicle without the consent of the Representative(s): December ___,
1998
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
Principal Amount of Notes to be Purchased
---------------------------------------------------------------------------------------------------
Underwriters Class A-1 Class A-2 Class A-3 Class A-4 Class A-5 Class A-6 Class A-7 Class A-8 Total
- --------------------- Notes Notes Notes Notes Notes Notes Notes Notes
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Merrill Lynch, Pierce, $ $ $ $ $ $ $ $ $
Fenner & Smith
Incorporated
Salomon Smith Barney
Inc.
Chase Securities Inc.
Donaldson, Lufkin &
Jenrette Securities
Corporation
First Chicago Capital
Markets, Inc.
NationsBanc Montgomery
Securities LLC
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total $ $ $ $ $ $ $ $ $
-------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------
</TABLE>
A-28
<PAGE>
EXHIBIT A
[SCHIFF HARDIN & WAITE LETTERHEAD]
December __, 1998
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith, Incorporated,
as Representative of the Underwriters
New York, New York
Ladies and Gentlemen:
We address this opinion to you individually and as Representatives of
the Underwriters (the "Underwriters") named in Schedule II to the Underwriting
Agreement dated December __, 1998 (the "Underwriting Agreement") among you,
Illinois Power Company, an Illinois corporation ("Illinois Power"), and Illinois
Power Securitization Limited Liability Company, a Delaware limited liability
company (the "Grantee"). The Underwriting Agreement provides for the sale on
the date hereof by Illinois Power Special Purpose Trust, a Delaware business
trust (the "Note Issuer") to the Underwriters of $864,000,000 aggregate
principal amount of Illinois Power Transitional Funding Trust Notes, Series 1998
(the "Notes"). This letter is delivered pursuant to Section 6(b) of the
Underwriting Agreement. Capitalized terms not defined herein have the meanings
specified in the Underwriting Agreement.
We have acted as special counsel to Illinois Power, the Grantee and
the Note Issuer (Illinois Power, the Note Issuer and the Grantee are hereinafter
sometimes collectively referred to as the "Companies") in connection with the
issuance and sale of the Notes and the following related matters: (a) the 1998
Funding Order issued by the Illinois Commerce Commission (the "ICC") dated
September 10, 1998 in Docket No. 98-0488 creating the Intangible Transition
Property and granting the same to the Grantee; (b) the Agreement Relating to
Grant of Intangible Transition Property dated as of December 1, 1998 between
Illinois Power and the Grantee (the "Grant Agreement"); (c) the Intangible
Transition Property Sale Agreement dated as of December 1, 1998 (the "Sale
Agreement") between the Note Issuer and the Grantee; (d) the Indenture dated as
of December 1, 1998 (the "Indenture") between the Note Issuer and Harris Trust
and Savings Bank, a banking corporation organized under the laws of the State of
Illinois, as indenture trustee (the "Indenture Trustee"); (e) the Trust
Issuance Certificate dated as of December 1, 1998 (the "Certificate") specifying
the terms of the Notes; (f)
A-1
<PAGE>
the Administration Agreement dated as of December 1, 1998 (the
"Administration Agreement") among Illinois Power, as Administrator and the
Grantee; (g) the Intangible Transition Property Servicing Agreement dated as
of December 1, 1998 (the "Servicing Agreement") between the Grantee and
Illinois Power, as Servicer, and (h) the Remediation Agreement dated as of
December 1, 1998, by and between Illinois Power and the Indenture Trustee.
The Grant Agreement, the Sale Agreement, the Indenture, the Certificate, the
Remediation Agreement, the Administration Agreement and the Servicing
Agreement are sometimes collectively referred to herein as the "Relevant
Documents."
We have also participated with officers and representatives of
Illinois Power, the Grantee and the Note Issuer, including the Grantee's
independent public accountants and representatives of the Underwriters, in the
preparation of the Registration Statement on Form S-3 (Registration No.
333-63537) and Amendments Nos. 1, 2 and 3 thereto, filed on October 27, 1998,
December 4, 1998 and December 9, 1998 respectively, with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), which registration statement, as so amended,
became effective on ______, 1998. Such registration statement, as so amended,
at the time it became effective (including the documents then incorporated by
reference therein) is hereinafter referred to as the "Registration Statement".
The prospectus forming a part of the Registration Statement (including the
documents incorporated by reference therein) is hereinafter referred to as the
"Basic Prospectus". The Basic Prospectus as the same was supplemented on
__________, 1998 to reflect the terms of the offering and sale of the Notes by a
prospectus supplement filed with the Commission on ___________, 1998 pursuant to
Rule 424(b) under the Securities Act (including all documents incorporated by
reference therein at the date hereof) is hereinafter referred to as the "Final
Prospectus."
In addition, we have examined and relied on the originals or copies
certified or otherwise identified to our satisfaction of such instruments and
other certificates of public officials, officers and representatives of the
Companies and such other persons, and we have made such investigations of law,
as we have deemed appropriate as a basis for the opinions expressed below. In
our examination, we have assumed, without independent investigation, (i) the
genuineness of the signatures of and legal capacity of all persons signing all
documents and instruments in connection with which the opinions expressed herein
are rendered, (ii) the authority of such persons signing on behalf of the
parties thereto, (iii) the due organization, valid existence, good standing and
authority of all entities signing all documents in connection with which the
opinions expressed herein are rendered (other than the Companies), (iv) the due
authorization, execution and delivery of all documents by the parties thereto
(other than the Companies), (v) the authenticity of all documents submitted to
us as originals, and (vi) the conformity to original documents of all documents
submitted to us as certified, conformed, or photostatic copies.
A-2
<PAGE>
Subject to the foregoing and the limitations and assumptions
hereinafter set forth, this will advise you that, in the opinion of the
undersigned:
(a) (i) Illinois Power (A) has been duly incorporated and is
validly existing as a corporation in good standing under the laws
of the State of Illinois, (B) has all requisite corporate power
and authority to own its properties, conduct its business as
presently conducted and execute, deliver and perform its
obligations under the Underwriting Agreement, the Grant
Agreement, the Servicing Agreement, the Remediation Agreement and
the Administration Agreement, and (C) is duly qualified to do
business in all jurisdictions (and is in good standing under the
laws of all such jurisdictions) to the extent that such
qualification and good standing is or shall be necessary to
protect the validity and enforceability of the Underwriting
Agreement, the Grant Agreement, the Servicing Agreement, the
Remediation Agreement and the Administration Agreement and each
other instrument or agreement necessary or appropriate to the
transactions contemplated by the Underwriting Agreement;
(ii) the Grant Agreement, the Servicing Agreement, the
Administration Agreement and the Remediation Agreement have been
duly authorized, executed and delivered by Illinois Power, and
constitute legal, valid and binding instruments enforceable
against Illinois Power in accordance with their respective terms,
except to the extent enforceability may be limited by bankruptcy,
reorganization, insolvency, moratorium, fraudulent transfer and
other similar laws of general applicability relating to or
affecting the enforcement of creditors' rights and by the effect
of general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at
law);
(iii) to our knowledge, there is no pending or threatened
action, suit or proceeding before any court or governmental
agency, authority or body or any arbitrator involving Illinois
Power or any of its significant subsidiaries of a character
required to be disclosed in the Registration Statement which is
not adequately disclosed in the Final Prospectus, and there is no
franchise, contract or other document of a character required to
be described in the Registration Statement or Final Prospectus,
or to be filed as an exhibit to the Registration Statement, which
is not described or filed as required;
(iv) the Underwriting Agreement has been duly authorized,
executed and delivered by Illinois Power;
(v) no consent, approval, authorization or order of any
court or governmental agency or body is required for the
consummation of the
A-3
<PAGE>
transactions contemplated by the Underwriting Agreement or the
Relevant Documents, except such as have been obtained under the
Securities Act, the Funding Law and the Public Utilities Act and
such as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of
the Notes by the Underwriters; and
(vi) neither the execution and delivery of the Underwriting
Agreement, the Grant Agreement, the Servicing Agreement, the
Remediation Agreement, the Administration Agreement nor the
consummation of the transactions contemplated by the Underwriting
Agreement, the Grant Agreement, the Servicing Agreement, the
Administration Agreement, or the Remediation Agreement, nor the
fulfillment of the terms of the Underwriting Agreement, the Grant
Agreement, the Servicing Agreement, the Administration Agreement
or the Remediation Agreement by Illinois Power, will (A) conflict
with, result in any breach or any of the terms or provisions of,
or constitute (with or without notice or lapse of time) a default
under the articles of incorporation or bylaws of Illinois Power,
or to our knowledge, conflict with or breach any of the material
terms or provisions of, or constitute (with or without notice or
lapse of time) a default under, any indenture, material agreement
or other material instrument to which Illinois Power is a party
or by which Illinois Power is bound, (B) result in the creation
or imposition of any lien upon any properties of Illinois Power
pursuant to the terms of any such indenture, agreement or other
instrument (other than as contemplated by the Relevant Documents
and Section 18-107 of the Funding Law), or (C) to our knowledge,
violate any law or any order, rule or regulation applicable to
Illinois Power of any court or of any federal or state regulatory
body, administrative agency or other governmental instrumentality
having jurisdiction over Illinois Power, or any of its
properties.
(b) (i) the Grantee has been duly formed and is validly
existing as a single member limited liability company and is in
good standing under the laws of the State of Delaware, with full
power and authority to execute, deliver and perform its
obligations under the Grant Agreement, the Sale Agreement, the
Servicing Agreement and the Administration Agreement;
(ii) the Grant Agreement, the Sale Agreement, the Servicing
Agreement and the Administration Agreement have been duly
authorized, executed and delivered by the Grantee, and constitute
legal, valid and binding instruments enforceable against the
Grantee in accordance with their respective terms, except to the
extent enforceability may be limited by bankruptcy,
reorganization, insolvency, moratorium, fraudulent conveyance and
other similar laws of general
A-4
<PAGE>
applicability relating to or affecting the enforceability of
creditors' rights and by the effect of general principles of
equity (regardless of whether enforceability is considered in a
proceeding in equity or at law);
(iii) the Grant Agreement, the Sale Agreement, the
Servicing Agreement, the Remediation Agreement, the Indenture
and the Notes conform in all material respects to the
descriptions thereof contained in the Final Prospectus;
(iv) neither the execution and delivery of the Grant
Agreement, the Sale Agreement, the Servicing Agreement, the
Underwriting Agreement or the Administration Agreement, nor the
consummation of the transactions contemplated thereby, nor the
fulfillment of the terms thereof by the Grantee, will (A)
conflict with, result in any breach of any of the terms or
provisions of, or constitute (with or without notice or lapse of
time) a default under the Certificate of Formation or Operating
Agreement of the Grantee or conflict with or breach any of the
material terms or provisions of, or constitute (with or without
notice or lapse of time) a default under, any indenture,
agreement or other instrument known to us and to which the
Grantee is a party or by which the Grantee is bound, (B) result
in the creation or imposition of any lien upon any properties of
the Grantee pursuant to the terms of any such indenture,
agreement or other instrument (other than as contemplated by the
Relevant Documents and Section 18-107 of the Funding Law), or (C)
to our knowledge, violate any law or any order, rule or
regulation applicable to the Grantee of any court or of any
federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the
Grantee, or any of its properties;
(v) to our knowledge, there is no pending or threatened
action, suit or proceeding before any court or governmental
agency, authority or body or any arbitrator challenging the
validity or enforceability of the Grant Agreement, the Sale
Agreement, the Servicing Agreement or the Administration
Agreement of a character required to be disclosed in the Final
Prospectus which is not adequately disclosed in the Final
Prospectus;
(vi) upon the delivery of the fully executed Sale Agreement
to the Note Issuer and the payment of the purchase price of the
Intangible Transition Property and related assets by the Note
Issuer to the Grantee pursuant to the Sale Agreement, (A) the
transfer of the Intangible Transition Property by the Grantee to
the Note Issuer pursuant to the Sale Agreement conveys all of the
Grantee's right, title and interest in the Intangible Transition
Property to the Note Issuer and will be treated as an
A-5
<PAGE>
absolute transfer of all of the Grantee's right, title and
interest in the Intangible Transition Property, other than for
federal and state income and franchise tax purposes, (B) such
transfer of the Intangible Transition Property is perfected,
(C) such transfer has priority over any other assignment of the
Intangible Transition Property and related assets, and (D) the
Intangible Transition Property and related assets are free and
clear of all liens created prior to its transfer to the Note
Issuer pursuant to the Sale Agreement; and
(vii) the Grantee is not an "investment company" or under
the "control" of an "investment company" as such terms are
defined under the Investment Company Act of 1940, as amended.
(ix) the Underwriting Agreement has been duly authorized,
executed and delivered by the Grantee;
(c) (i) the Notes have been duly authorized and executed by the
Note Issuer and, when authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by the
Underwriters pursuant to the Underwriting Agreement, will be
valid and legally binding obligations enforceable in accordance
with their terms, except to the extent enforceability may be
limited by bankruptcy, reorganization, insolvency, moratorium,
fraudulent conveyance or other similar laws of general
applicability relating to or affecting the enforceability of
creditors' rights and by the effect of general principles of
equity (regardless of whether enforceability is considered in a
proceeding in equity or at law) and entitled to the benefits of
the Indenture; and the Notes and the Indenture conform in all
material respects to the descriptions thereof in the Final
Prospectus;
(ii) the Indenture, the Certificate and the Sale Agreement
have each been duly authorized, executed and delivered by the
Note Issuer and each constitutes a legal, valid and binding
instrument enforceable in accordance with its terms, except to
the extent enforceability may be limited by bankruptcy,
reorganization, insolvency, moratorium, fraudulent conveyance and
other similar laws of general applicability relating to or
effecting the enforceability of creditors' rights and by the
effect of general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at
law);
(iii) the Indenture has been duly qualified under the Trust
Indenture Act;
(iv) to our knowledge, there is no pending or threatened
action, suit or proceeding before any court or governmental
agency, authority or
A-6
<PAGE>
body or any arbitrator challenging the validity or
enforceability of the Notes or the Indenture, or relating to
the 1998 Funding Order or the collection of the IFC Charges,
of a character required to be disclosed in the Registration
Statement which is not adequately disclosed in the Final
Prospectus, and there is no franchise, contract or other
document relating to the Notes or the Indenture, or relating
to the 1998 Funding Order or the collection of the IFC
Charges, of a character required to be described in the
Registration Statement or Final Prospectus, or to be filed as
an exhibit, which is not described or filed as required; and
the statements included or incorporated in the Final
Prospectus under the headings "Electric Industry Restructuring
in Illinois" (to the extent the Amendatory Act is described)
"Description of the Intangible Transition Property"
"Description of the Notes," "The Trust," "The Grantee,"
"Servicing," "Security for the Notes," "Material United States
Federal Tax Consequences" and "ERISA Considerations", to the
extent that they constitute matters of Illinois, Delaware or
federal law or legal conclusions with respect thereto, provide
a fair and accurate summary of such law or conclusions;
(v) the Registration Statement has become effective under
the Act; any required filing of the Basic Prospectus, any
Preliminary Final Prospectus and the Final Prospectus, and any
supplements thereto, pursuant to Rule 424(b) has been made in the
manner and within the time period required by Rule 424(b); to our
knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued, no proceedings for that
purpose have been instituted or threatened, and the Registration
Statement and the Final Prospectus (other than operating
statistics, the financial statements and other financial and
statistical information contained therein and the Form T-1 as to
which we express no opinion) comply as to form in all material
respects with the applicable requirements of the Act, the
Exchange Act and the Trust Indenture Act and the respective rules
thereunder;
(vi) neither the execution and delivery of the Underwriting
Agreement or the Indenture, nor the issue and sale of the Notes,
nor the consummation of the transactions contemplated by the
Underwriting Agreement or the Indenture, nor the fulfillment of
the terms of the Underwriting Agreement or the Indenture by the
Note Issuer will (A) conflict with, result in any breach of any
of the terms or provisions of, or constitute (with or without
notice or lapse of time) a default under the Trust Agreement, or
conflict with or breach any of the material terms or provisions
of, or constitute (with or without notice or lapse of time) a
default under, any indenture, agreement or other instrument known
to us and to which the Note Issuer is a party or by which the
Note Issuer is bound, (B) result in the creation or imposition of
any lien upon any
A-7
<PAGE>
properties of the Note Issuer pursuant to the terms of any
such indenture, agreement or other instrument other than the
lien created by the Indenture on the Note Collateral, or (C)
to our knowledge, violate any law or any order, rule or
regulation applicable to the Note Issuer of any court or of
any federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over
the Note Issuer, or any of its properties;
(vii) (A) the lien of the Indenture in favor of the Holders
in the Intangible Transition Property attaches automatically; (B)
such lien has been perfected in accordance with Section 18-107(c)
of the Funding Law and in accordance with the 1998 Funding Order;
(C) such lien is valid and enforceable against Illinois Power,
the Servicer, the Grantee, the Note Issuer and all third parties,
including judgment lien creditors; and (D) such lien ranks prior
to any other lien which subsequently attaches to the Intangible
Transition Property; and
(viii) Neither Illinois Power nor the Note Issuer is an
"investment company" or under the "control" of an "investment
company" as such terms are defined under the Investment Company
Act of 1940, as amended.
In the course of the preparation of the Registration Statement and the
Final Prospectus we have considered the information set forth therein in the
light of the matters required to be set forth therein, and, as noted above, we
have participated in discussions with your representatives and officers and
representatives of the Companies during the course of which the contents of the
Registration Statement, the Final Prospectus, the documents incorporated by
reference in the Final Prospectus and related matters were discussed. We have
not independently checked the accuracy or completeness of, or otherwise
verified, and accordingly are not passing upon, and do not assume any
responsibility for, the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Final Prospectus (except to the
extent stated in paragraphs (b)(iii), (c)(i) and (c)(iv) above); and we have
relied as to materially (with respect to non-legal matters), to a large extent,
upon the judgement of officers and representatives of the Companies. However,
as a result of such consideration and participation, nothing has come to our
attention that causes us to believe that the Registration Statement (except for
the operating statistics, financial statements and other financial or
statistical data included or incorporated by reference therein and the Form T-1,
as to which we have not been asked to comment) at the effective date thereof or
at the date hereof, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Final Prospectus (except for the
operating statistics, financial statements and other financial or statistical
data contained or incorporated by reference therein and the Form T-1, as to
which we have not been asked to comment) as of its date contained, or as of the
date hereof contains, any untrue statement of a material fact
A-8
<PAGE>
or omitted or omits to state a material fact necesary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
The foregoing opinions are limited to the laws of Illinois and New
York, the Delaware Limited Liability Company Act and, to the extent specifically
referred to herein, the federal laws of the United States of America. In giving
the opinions set forth in paragraphs (a)(ii), (b)(ii), (b)(vi), (c)(i) and
(c)(ii) we have, with your consent, assumed the validity and continued
effectiveness of the Amendatory Act (including, without limitation, the Funding
Law and the 1998 Funding Order). In that regard we refer you to our opinion of
even date herewith delivered pursuant to Section 6(l) of the Underwriting
Agreement. Further, we have relied, with your consent, on the opinion of even
date herewith of Richards, Layton & Finger delivered pursuant to Section 6(d) of
the Underwriting Agreement and on the opinion of Mayer, Brown & Platt delivered
in the form of Exhibit 8.1 to the Registration Statement. We express no opinion
as to the enforceability of any provisions of the Grant Agreement or the
Servicing Agreement pursuant to which Illinois Power, the Grantee or the
servicer covenant to continue to deduct and collect amounts equal to the IFC
Charges and equivalent amounts, and to remit those amounts to the servicer or
the Note Issuer, as the case may be, if the Funding Order were no longer in
effect.
Any opinion or statement herein which is expressed to be "to our
knowledge" or is otherwise qualified by words of like import means that the
lawyers currently practicing law with this Firm who have had an active
involvement in the preparation of the Registration Statement have no current
conscious awareness of any facts or information contrary to such opinion or
statement; and, except as described above, we have undertaken no independent
investigation with respect to such facts or information.
We consent to the reliance on the opinions expressed herein by the
Rating Agencies and, with respect to the opinions set forth in (c) above, by
Illinois Power, the Grantee and the Indenture Trustee. Except as set forth in
the preceding sentence, this opinion is being delivered solely to you for your
benefit in connection with the closing under the Underwriting Agreement and may
not be delivered to, or relied upon by, or otherwise circulated to or utilized
by, any other party or for any other purpose without our prior written consent.
The opinions in this letter speak as of the date hereof and we assume
no obligation to supplement the foregoing opinions if any applicable laws change
after the date hereof or if we become aware of any facts which might change such
opinions after the date hereof.
Very truly yours,
SCHIFF HARDIN & WAITE
A-9
<PAGE>
By:
-------------------------------------
Bruce P. Weisenthal
A-10
<PAGE>
EXHIBIT 4.3
FORM OF INDENTURE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ILLINOIS POWER SPECIAL PURPOSE TRUST,
Note Issuer
and
HARRIS TRUST AND SAVINGS BANK,
Indenture Trustee
------------------------------------------
INDENTURE
Dated as of December 1, 1998
------------------------------------------
Issuable in Series
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - DEFINITIONS AND INCORPORATION BY REFERENCE . . . . . . . . . . . . . . .3
SECTION 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . .3
SECTION 1.02. Incorporation by Reference of Trust Indenture Act. . . . . . . .3
SECTION 1.03. Rules of Construction. . . . . . . . . . . . . . . . . . . . . .3
ARTICLE II - THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
SECTION 2.01. Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
SECTION 2.02. Denominations; Notes Issuable in Series. . . . . . . . . . . . .4
SECTION 2.03. Execution Authentication and Delivery. . . . . . . . . . . . . .6
SECTION 2.04. Temporary Notes. . . . . . . . . . . . . . . . . . . . . . . . .6
SECTION 2.05. Registration; Registration of Transfer and Exchange of
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Notes . . . . . . . . . . .8
SECTION 2.07. Persons Deemed Owner . . . . . . . . . . . . . . . . . . . . . .8
SECTION 2.08. Payment of Principal, Premium if any, and Interest; Interest
on Overdue Principal; Principal, Premium, if any, and
Interest Rights Preserved. . . . . . . . . . . . . . . . . . . .9
SECTION 2.09. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.10. Outstanding Amount; Authentication and Delivery of Notes . . . 10
SECTION 2.11. Book-Entry Notes . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.12. Notices to Clearing Agency . . . . . . . . . . . . . . . . . . 18
SECTION 2.13. Definitive Notes . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.14. CUSIP Number . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.15. Letter of Representations. . . . . . . . . . . . . . . . . . . 19
SECTION 2.16. Release of Note Collateral . . . . . . . . . . . . . . . . . . 19
SECTION 2.17. Special Terms Applicable to Subsequent Transfers of Certain
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.18. Tax Treatment. . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.19. State Pledge . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE III - COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.01. Payment of Principal, Premium, if any, and Interest. . . . . . 21
SECTION 3.02. Maintenance of Office or Agency. . . . . . . . . . . . . . . . 22
SECTION 3.03. Money for Payments To Be Held in Trust . . . . . . . . . . . . 22
SECTION 3.04. Existence. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.05. Protection of Note Collateral. . . . . . . . . . . . . . . . . 23
SECTION 3.06. Opinions as to Note Collateral . . . . . . . . . . . . . . . . 24
SECTION 3.07. Performance of Obligations; Servicing SEC Filings. . . . . . . 25
SECTION 3.08. Certain Negative Covenants . . . . . . . . . . . . . . . . . . 27
SECTION 3.09. Annual Statement as to Compliance. . . . . . . . . . . . . . . 27
(i)
<PAGE>
SECTION 3.10. Note Issuer May Consolidate, etc., Only on Certain Terms . . . 28
SECTION 3.11. Successor or Transferee. . . . . . . . . . . . . . . . . . . . 30
SECTION 3.12. No Other Business. . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.13. No Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.14. Servicer's Obligations . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.15. Guarantees Loans Advances and Other Liabilities. . . . . . . . 30
SECTION 3.16. Capital Expenditures.. . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.17. Restricted Payments. . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.18. Notice of Events of Default. . . . . . . . . . . . . . . . . . 31
SECTION 3.19. Further Instruments and Acts . . . . . . . . . . . . . . . . . 31
SECTION 3.20. Purchase of Subsequent Transition Property . . . . . . . . . . 31
ARTICLE IV - SATISFACTION AND DISCHARGE; DEFEASANCE. . . . . . . . . . . . . . . . 33
SECTION 4.01. Satisfaction and Discharge of Indenture Defeasance . . . . . . 33
SECTION 4.02. Conditions to Defeasance . . . . . . . . . . . . . . . . . . . 35
SECTION 4.03. Application of Trust Money . . . . . . . . . . . . . . . . . . 36
SECTION 4.04. Repayment of Moneys Held by Paying Agent . . . . . . . . . . . 36
ARTICLE V - REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.01. Events of Default. . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment . . . . . . 38
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement
by Indenture Trustee . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.04. Remedies; Priorities . . . . . . . . . . . . . . . . . . . . . 41
SECTION 5.05. Optional Preservation of the Note Collateral . . . . . . . . . 42
SECTION 5.06. Limitation of Suits. . . . . . . . . . . . . . . . . . . . . . 42
SECTION 5.07. Unconditional Rights of Holders To Receive Principal,
Premium, if any, and Interest. . . . . . . . . . . . . . . . . 43
SECTION 5.08. Restoration of Rights and Remedies . . . . . . . . . . . . . . 43
SECTION 5.09. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . 43
SECTION 5.10. Delay or Omission Not a Waiver . . . . . . . . . . . . . . . . 43
SECTION 5.11. Control by Holders . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 5.12. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . . 44
SECTION 5.13. Undertaking for Costs. . . . . . . . . . . . . . . . . . . . . 45
SECTION 5.14. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . . 45
SECTION 5.15. Action on Notes. . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 5.16. Performance and Enforcement of Certain Obligations . . . . . . 45
ARTICLE VI - THE INDENTURE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 6.01. Duties of Indenture Trustee. . . . . . . . . . . . . . . . . . 46
SECTION 6.02. Rights of Indenture Trustee. . . . . . . . . . . . . . . . . . 48
SECTION 6.03. Individual Rights of Indenture Trustee . . . . . . . . . . . . 48
SECTION 6.04. Indenture Trustee's Disclaimer . . . . . . . . . . . . . . . . 48
(ii)
<PAGE>
SECTION 6.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 6.06. Reports by Indenture Trustee to Holders. . . . . . . . . . . . 49
SECTION 6.07. Compensation and Indemnity . . . . . . . . . . . . . . . . . . 49
SECTION 6.08. Replacement of Indenture Trustee . . . . . . . . . . . . . . . 50
SECTION 6.09. Successor Indenture Trustee by Merger. . . . . . . . . . . . . 51
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee. . . . . . . . . 51
SECTION 6.11. Eligibility; Disqualification. . . . . . . . . . . . . . . . . 53
SECTION 6.12. Preferential Collection of Claims Against Note Issuer. . . . . 53
SECTION 6.13. Representations and Warranties of Indenture Trustee. . . . . . 53
ARTICLE VII - HOLDERS' LISTS AND REPORTS . . . . . . . . . . . . . . . . . . . . . 53
SECTION 7.01. Note Issuer To Furnish Indenture Trustee Names and
Addresses of Holders . . . . . . . . . . . . . . . . . . . . . 53
SECTION 7.02. Preservation of Information; Communications to Holders . . . . 54
SECTION 7.03. Reports by Note Issuer . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.04. Reports by Indenture Trustee . . . . . . . . . . . . . . . . . 55
ARTICLE VIII - ACCOUNTS, DISBURSEMENTS AND RELEASES. . . . . . . . . . . . . . . . 55
SECTION 8.01. Collection of Money. . . . . . . . . . . . . . . . . . . . . . 55
SECTION 8.02. Collection Account . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 8.03. General Provisions Regarding the Collection Account. . . . . . 58
SECTION 8.04. Release of Note Collateral . . . . . . . . . . . . . . . . . . 59
SECTION 8.05. Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 8.06. Reports by Independent Accountants . . . . . . . . . . . . . . 60
ARTICLE IX - SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 9.01. Supplemental Indentures Without Consent of Holders . . . . . . 60
SECTION 9.02. Supplemental Indentures with Consent of Holders. . . . . . . . 62
SECTION 9.03. Execution of Supplemental Indentures.. . . . . . . . . . . . . 63
SECTION 9.04. Effect of Supplemental Indenture . . . . . . . . . . . . . . . 64
SECTION 9.05. Conformity with Trust Indenture Act. . . . . . . . . . . . . . 64
SECTION 9.06. Reference in Notes to Supplemental Indentures. . . . . . . . . 64
ARTICLE X - REDEMPTION OF NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 10.01. Optional Redemption by Note Issuer . . . . . . . . . . . . . . 64
SECTION 10.02. Form of Optional Redemption Notice . . . . . . . . . . . . . . 65
SECTION 10.03. Notes Payable on Optional Redemption Date. . . . . . . . . . . 65
ARTICLE XI - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 11.01. Compliance Certificates and Opinions, etc. . . . . . . . . . . 66
SECTION 11.02. Form of Documents Delivered to Indenture Trustee . . . . . . . 67
SECTION 11.03. Acts of Holders. . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 11.04. Notices, etc. to Indenture Trustee, Note Issuer and
(iii)
<PAGE>
Rating Agencies . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 11.05. Notices to Holders Waiver. . . . . . . . . . . . . . . . . . . 69
SECTION 11.06. Conflict with Trust Indenture Act. . . . . . . . . . . . . . . 70
SECTION 11.07. Effect of Headings and Table of Contents . . . . . . . . . . . 70
SECTION 11.08. Successors and Assigns . . . . . . . . . . . . . . . . . . . . 70
SECTION 11.09. Separability . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 11.10. Benefits of Indenture. . . . . . . . . . . . . . . . . . . . . 70
SECTION 11.11. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 11.12. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 11.13. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 11.14. Recording of Indenture . . . . . . . . . . . . . . . . . . . . 71
SECTION 11.15. Trust Obligation . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 11.16. No Recourse to Note Issuer . . . . . . . . . . . . . . . . . . 71
SECTION 11.17. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 11.18. No Petition. . . . . . . . . . . . . . . . . . . . . . . . . . 72
EXHIBIT A-1 -- Form of Notes
EXHIBIT B -- Form of Trust Issuance Certificate
EXHIBIT C -- Form of Series Supplement
(iv)
</TABLE>
<PAGE>
CROSS REFERENCE TABLE
<TABLE>
<CAPTION>
TIA SECTION INDENTURE SECTION
----------- -----------------
<C> <C> <C> <S>
310 (a)(1) 6.11
(a)(2) 6.11
(a)(3) 6.10
(a)(4) N.A.
(a)(5) 6.11
(b) 6.11
(c) N.A.
311 (a) 6.12
(b) 6.12
(c) N.A.
312 (a) 7.01, 7.02
(b) 7.02
(c) 7.02
313 (a) 7.04
(b)1 7.04
(b)2 7.04
(c) 7.04
(d) 7.04
314 (a) 7.03(a), 3.09
(b) 3.06
(c)1 2.10, 4.01, 11.01(a)
(c)2 2.10, 4.01, 11.01(a)
(c)3 2.10, 4.01, 11.01(a)
(d) 2.10, 11.01(a)
(e) 11.01(a)
(f) 11.01(a)
315 (a) 6.01(b)
(b) 6.05
(c) 6.01(a)
(d) 6.02, 6.01(c)
(e) 5.13
316 (a)last Appendix A "Outstanding"
sentence
(a)(1)(A) 5.11
(a)(1)(B) 5.12
(a)(2) Omitted
(b) 5.07
(c) Appendix A "Record Date"
317 (a)(1) 5.03(b)
(a)(2) 5.03(c)
(b) 3.03
318 (a) 11.07
</TABLE>
<PAGE>
N.A. means Not Applicable.
Note: This cross reference table shall not, for any purpose, be deemed to be
part of this Indenture.
vi
<PAGE>
INDENTURE dated as of December 1, 1998, between ILLINOIS POWER
SPECIAL PURPOSE TRUST, a Delaware business trust (the "Note Issuer"), and
Harris Trust and Savings Bank, a banking corporation organized under the laws
of the State of Illinois, as trustee (the "Indenture Trustee").
In consideration of the mutual agreements herein contained, each
party agrees as follows for the benefit of the other and each of the Holders:
RECITALS OF THE NOTE ISSUER
The Note issuer has duly authorized the execution and delivery of
this Indenture and the creation and issuance of Notes issuable in Series
hereunder, each Series to be of substantially the tenor set forth herein and
in the respective Trust Issuance Certificate or Series Supplement, if any,
relating to each such Series of Notes.
The Notes shall be non-recourse obligations and shall be secured by
and payable solely out of the proceeds of the Intangible Transition Property
and the other Note Collateral. If and to the extent that such proceeds of
Intangible Transition Property and the other Note Collateral are insufficient
to pay all amounts owing with respect to the Notes, then, except as otherwise
expressly provided hereunder, the Holders of the Notes shall have no Claim in
respect of such insufficiency against the Note Issuer, and the Holders, by
their acceptance of the Notes, waive any such Claim.
All things necessary to (a) make the Notes, when executed by the
Note Issuer and authenticated and delivered by the Indenture Trustee
hereunder and duly issued by the Note Issuer, valid obligations, and (b) make
this Note Indenture a valid agreement of the Note Issuer, in each case, in
accordance with their respective terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That the Note Issuer, in consideration of the premises herein
contained and of the purchase of the Notes by the Holders and of other good
and lawful consideration, the receipt and sufficiency of which are hereby
acknowledged, and to secure, equally and ratably without prejudice, priority
or distinction, except as specifically otherwise set forth in this Indenture,
the payment of the Notes, the payment of all other amounts due under or in
connection with this Indenture and the performance and observance of all of
the covenants and conditions contained herein or in such Notes, has hereby
executed and delivered this Indenture and by these presents does hereby
convey, grant and assign, transfer and pledge, in each case, in and unto the
Indenture Trustee, its successors and assigns forever, for the benefit of the
Holders, all and singular the property hereinafter described (hereinafter
referred to as the "NOTE COLLATERAL"), to wit:
<PAGE>
GRANTING CLAUSE
The Note Issuer hereby Grants to the Indenture Trustee at the
Closing Date, as Indenture Trustee for the benefit of the Holders of the
Notes from time to time issued and outstanding, all of the Note Issuer's
right, title and interest in and to (a) the Intangible Transition Property
created under and pursuant to the 1998 Funding Order, and transferred by the
Grantee to the Note Issuer pursuant to the Sale Agreement (including, to the
fullest extent permitted by law, all revenues, collections, claims, rights,
payments, money or proceeds of or arising from the IFCs authorized in the
1998 Funding Order and any Tariffs filed pursuant thereto and any Allocable
IFC Revenue Amounts), (b) all Intangible Transition Property created under
and pursuant to any Subsequent Funding Order, and transferred by the Grantee
to the Note Issuer pursuant to a Subsequent Sale Agreement (including, to the
fullest extent permitted by law, all revenues, collections, claims, rights,
payments, money or proceeds of or arising from the IFCs authorized in such
Subsequent Funding Order and any Subsequent Tariffs filed pursuant thereto
and any Allocable IFC Revenue Amounts), (c) the Grant Agreement, the Sale
Agreement and all property and interests in property transferred under the
Sale Agreement, (d) each Subsequent Grant Agreement, Subsequent Sale
Agreement and all property and interests in property transferred under any
Subsequent Sale Agreement, (e) the Servicing Agreement, (f) the Collection
Account, all subaccounts thereof and all amounts of cash or investment
property on deposit therein or credited thereto from time to time, (g) any
interest rate exchange agreement which is executed in connection with the
issuance of Floating Rate Notes, if any, (h) all rights to compel the
Servicer to file for and obtain adjustments to the IFCs in accordance with
Section 18-104(d) of the Funding Law, the 1998 Funding Order or any
Subsequent Funding Order or any Tariff or Subsequent Tariff filed in
connection therewith, (i) all present and future claims, demands, causes and
choses in action in respect of any or all of the foregoing, (j) all general
intangibles, chattel paper and accounts of the Note Issuer, and (k) all
payments on or under, and all proceeds in respect of, any or all of the
foregoing; it being understood that the following do not constitute Note
Collateral: (i) cash that has been released pursuant to Section 8.02(d)(xiii)
following retirement of all Outstanding Series of Notes, (ii) net investment
earnings which have been released to the Note Issuer pursuant to Section
8.02(d), and (iii) amounts deposited with the Note Issuer on any Series
Issuance Date, including the Closing Date, for payment of costs of issuance
with respect to the related Series (together with any interest earnings
thereon), it being understood that such amounts described in clauses (i) and
(iii) above shall not be subject to Section 3.17.
The foregoing Grant is made in trust to secure the payment of
principal of and premium, if any, interest on, and any other amounts owing in
respect of, the Notes equally and ratably without prejudice, priority or
distinction, except as expressly provided in this Indenture, and to secure
compliance with the provisions of this Indenture with respect to the Notes,
all as provided in this Indenture. This Indenture constitutes a security
agreement within the meaning of the UCC to the extent that, under Illinois
law, the provisions of the UCC are applicable hereto.
2
<PAGE>
The Indenture Trustee, as trustee on behalf of the Holders,
acknowledges such Grant and accepts the trusts under this Indenture in
accordance with the provisions of this Indenture.
AND IT IS HEREBY COVENANTED, DECLARED AND AGREED between the parties
hereto that all Notes are to be issued, countersigned and delivered and that
all of the Note Collateral is to be held and applied, subject to the further
covenants, conditions, releases, uses and trusts hereinafter set forth, and
the Note Issuer, for itself and any successor, does hereby covenant and agree
to and with the Indenture Trustee and its successors in said trust, for the
benefit of the Holders, as follows:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS. Except as otherwise specified herein
or as the context may otherwise require, the capitalized terms used herein
shall have the respective meanings set forth in Appendix A attached hereto
and made a part hereof for all purposes of this Indenture.
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Indenture Securities" means the Notes.
"Indenture Security Holder" means a Holder.
"Indenture to be Qualified" means this Indenture.
"Indenture Trustee" or "Institutional Trustee" means the Indenture
Trustee.
"Obligor" on the indenture securities means the Note Issuer and any
other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
SECTION 1.03. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
3
<PAGE>
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles as in
effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the
plural include the singular; and
(vi) the words "herein," "hereof," "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
ARTICLE II
THE NOTES
SECTION 2.01. FORM. The Notes and the Indenture Trustee's
certificate of authentication shall be in substantially the forms set forth in
Exhibit B, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture or by the related
Trust Issuance Certificate or Series Supplement, if any, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution of such Notes.
Any portion of the text of any Note may be set forth on the reverse thereof,
with an appropriate reference thereto on the face of the Note.
The Notes shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods (with or without steel engraved
borders), all as determined by the officers executing such Notes, as evidenced
by their execution of such Notes.
Each Note shall be dated the date of its authentication. The terms of
the Notes set forth in Exhibit B are part of the terms of this Indenture.
SECTION 2.02. DENOMINATIONS; NOTES ISSUABLE IN SERIES. The Notes
shall be issuable in the Minimum Denomination specified in the applicable Trust
Issuance Certificate or Series Supplement, if any, in either case executed on
behalf of the Trust by an Authorized Officer of the Delaware Trustee and, except
as otherwise provided in such Trust Issuance Certificate or Series Supplement,
if any, in integral multiples thereof.
The Notes may, at the election of and as authorized by a Responsible
Officer of the Note Issuer, be issued in one or more Series (each comprised of
one or more Classes), and shall be designated generally as the "Transitional
Funding Trust Notes" of the Note Issuer, with such
4
<PAGE>
further particular designations added or incorporated in such title for the
Notes of any particular Series or Class as a Responsible Officer of the Note
Issuer may determine. Each Note shall bear upon its face the designation so
selected for the Series or Class to which it belongs. All Notes of the same
Series shall be identical in all respects except for the denominations
thereof, unless such Series is comprised of one or more Classes, in which
case all Notes of the same Class shall be identical in all respects except
for the denominations thereof. All Notes of a particular Series or, if such
Series is comprised of one or more Classes, all Notes of a particular Class
thereof, in each case issued under this Indenture, shall be in all respects
equally and ratably entitled to the benefits hereof without preference,
priority, or distinction on account of the actual time or times of
authentication and delivery, all in accordance with the terms and provisions
of this Indenture.
Each Series of Notes shall be created by a Trust Issuance Certificate
or Series Supplement, as the case may be, authorized by a Responsible Officer of
the Note Issuer and establishing the terms and provisions of such Series. The
several Series and Classes thereof may differ as between Series and Classes, in
respect of any of the following matters:
(1) designation of the Series and, if applicable, the Classes
thereof,
(2) the principal amount;
(3) the Note Interest Rate;
(4) the Payment Dates;
(5) the Scheduled Maturity Date;
(6) the Final Maturity Date;
(7) the Series Issuance Date;
(8) the place or places for the payment of interest, principal and
premium, if any;
(9) the Minimum Denominations;
(10) the Expected Amortization Schedule;
(11) provisions with respect to the definitions set forth in
Appendix A hereto;
(12) whether or not the Notes of such Series are to be Book-Entry
Notes and the extent to which Section 2.11 should apply;
5
<PAGE>
(13) any redemption provisions applicable to the Notes of such
Series and the price or prices at which and the terms and
conditions upon which Notes of such Series shall be redeemed or
purchased;
(14) to the extent applicable, the extent to which payments on the
Notes of the related Series are subordinate to or PARI PASSU in
right of payment of principal and interest to other Notes; and
(15) any other provisions expressing or referring to the terms and
conditions upon which the Notes of the applicable Series or
Class are to be issued under this Indenture that are not in
conflict with the provisions of this Indenture and as to which
the Rating Agency Condition is satisfied.
SECTION 2.03. EXECUTION AUTHENTICATION AND DELIVERY. The Notes
shall be executed on behalf of the Note Issuer by any of its Responsible
Officers. The signature of any such Responsible Officer on the Notes may be
manual or facsimile.
Notes bearing the manual or facsimile signature of individuals who
were at any time Responsible Officers of the Note Issuer shall bind the Note
Issuer, notwithstanding that such individuals or any of them have ceased to hold
such offices prior to the authentication and delivery of such Notes or did not
hold such offices at the date of such Notes.
At any time and from time to time after the execution and delivery of
this Indenture, the Note Issuer may deliver Notes executed by the Note Issuer to
the Indenture Trustee pursuant to an Issuer Order for authentication; and the
Indenture Trustee shall authenticate and deliver such Notes as in this Indenture
provided and not otherwise.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for therein
executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate upon any Note shall be conclusive
evidence, and the only evidence, that such Note has been duly authenticated and
delivered hereunder.
SECTION 2.04. TEMPORARY NOTES. Pending the preparation of
Definitive Notes, the Note Issuer may execute, and upon receipt of an Issuer
Order the Indenture Trustee shall authenticate and deliver, Temporary Notes
which are printed, lithographed, typewritten, mimeographed or otherwise
produced, of the tenor of the Definitive Notes in lieu of which they are issued
and with such variations not inconsistent with the terms of this Indenture as
the officers executing such Notes may determine, as evidenced by their execution
of such Notes.
If Temporary Notes are issued, the Note Issuer will cause Definitive
Notes to be prepared without unreasonable delay. After the preparation of
Definitive Notes, the temporary
6
<PAGE>
Notes shall be exchangeable for Definitive Notes upon surrender of the
Temporary Notes at the office or agency of the Note Issuer to be maintained
as provided in Section 3.02, without charge to the Holder. Upon surrender for
cancellation of any one or more Temporary Notes, the Note Issuer shall
execute and the Indenture Trustee shall authenticate and deliver in exchange
therefor a like principal amount of Definitive Notes of authorized
denominations. Until so delivered in exchange, the Temporary Notes shall in
all respects be entitled to the same benefits under this Indenture as
Definitive Notes.
SECTION 2.05. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE OF
NOTES. The Note Issuer shall cause to be kept a register (the "Note Register")
in which, subject to such reasonable regulations as it may prescribe, the Note
Issuer shall provide for the registration of Notes and the registration of
transfers of Notes. The Indenture Trustee shall be "Note Registrar" for the
purpose of registering Notes and transfers of Notes as herein provided. Upon
any resignation of any Note Registrar, the Note Issuer shall promptly appoint a
successor or, if it elects not to make such an appointment, assume the duties of
Note Registrar.
If a Person other than the Indenture Trustee is appointed by the Note
Issuer as Note Registrar, the Note Issuer will give the Indenture Trustee prompt
written notice of the appointment of such Note Registrar and of the location,
and any change in the location, of the Note Register, and the Indenture Trustee
shall have the right to inspect the Note Register at all reasonable times and to
obtain copies thereof, and the Indenture Trustee shall have the right to rely
conclusively upon a certificate executed on behalf of the Note Registrar by a
Responsible Officer thereof as to the names and addresses of the Holders of the
Notes and the principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office
or agency of the Note Issuer to be maintained as provided in Section 3.02, the
Note Issuer shall execute, and the Indenture Trustee shall authenticate and the
Holder shall obtain from the Indenture Trustee, in the name of the designated
transferee or transferees, one or more new Notes in any Minimum Denominations,
of the same Series (and, if applicable, Class) and aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes in
any Minimum Denominations, of the same Series (and, if applicable, Class) and
aggregate principal amount, upon surrender of the Notes to be exchanged at such
office or agency. Whenever any Notes are so surrendered for exchange, the Note
Issuer shall execute, and the Indenture Trustee shall authenticate and the
Holder shall obtain from the Indenture Trustee, the Notes which the Holder
making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of
other Notes shall be the valid obligations of the Note Issuer, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the Notes
surrendered upon such registration of transfer or exchange.
7
<PAGE>
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by (a) a written
instrument of transfer in form satisfactory to the Indenture Trustee duly
executed by the Holder thereof or such Holder's attorney duly authorized in
writing, with such signature guaranteed by an institution which is a member of
one of the following recognized Signature Guaranty Programs: (i) The Securities
Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange
Medallion Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP); or
(iv) such other guarantee program acceptable to the Indenture Trustee, and (b)
such other documents as the Indenture Trustee may require.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Note Issuer or Indenture Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Notes, other than exchanges pursuant to Section 2.04 or 9.06 not
involving any transfer.
The preceding provisions of this Section notwithstanding, the Note
Issuer shall not be required to make, and the Note Registrar need not register
transfers or exchanges (i) of Notes that have been selected for redemption
pursuant to Article X, (ii) of any Note that has been submitted within 15 days
preceding the due date for any payment with respect to such Note or (iii) of
Unregistered Notes unless Section 2.17 has been complied with in connection with
such transfer or exchange.
SECTION 2.06. MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If
(i) any mutilated Note is surrendered to the Indenture Trustee, or the Indenture
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note, and (ii) there is delivered to the Indenture Trustee such security
or indemnity as may be required by it to hold the Note Issuer and the Indenture
Trustee harmless, then the Note Issuer shall execute and, upon its written
request, the Indenture Trustee shall authenticate and deliver, in exchange for
or in lieu of any such mutilated, destroyed, lost or stolen Note, a replacement
Note of like Series (and, if applicable, Class), tenor and principal amount,
bearing a number not contemporaneously outstanding; PROVIDED, HOWEVER, that if
any such destroyed, lost or stolen Note, but not a mutilated Note, shall have
become or within seven days shall be due and payable, or shall have been called
for redemption, instead of issuing a replacement Note, the Note Issuer may pay
such destroyed, lost or stolen Note when so due or payable or upon the Optional
Redemption Date without surrender thereof If, after the delivery of such
replacement Note or payment of a destroyed, lost or stolen Note pursuant to the
proviso to the preceding sentence, a purchaser of the original Note in lieu of
which such replacement Note was issued presents for payment such original Note,
the Note Issuer and the Indenture Trustee shall be entitled to recover such
replacement Note (or such payment) from the Person to whom it was delivered or
any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person and shall be
entitled to recover upon the security or indemnity provided therefor to the
extent of
8
<PAGE>
any loss, damage, cost or expense incurred by the Note Issuer or the
Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section, the Note
Issuer and/or the Indenture Trustee may require the payment by the Holder of
such Note of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other reasonable expenses (including
the fees and expenses of the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in replacement
of any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Note Issuer, whether or not the
mutilated, destroyed, lost or stolen Note shall be found at any time or enforced
by any Person, and shall be entitled to all the benefits of this Indenture
equally and proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.07. PERSONS DEEMED OWNER. Prior to due presentment for
registration of transfer of any Note, the Note Issuer, the Indenture Trustee and
any agent of the Note Issuer or the Indenture Trustee may treat the Person in
whose name any Note is registered (as of the day of determination) as the owner
of such Note for the purpose of receiving payments of principal of and premium,
if any, and interest on such Note and for all other purposes whatsoever, whether
or not such Note be overdue, and neither the Note Issuer, the Indenture Trustee
nor any agent of the Note Issuer or the Indenture Trustee shall be affected by
notice to the contrary.
SECTION 2.08. PAYMENT OF PRINCIPAL, PREMIUM IF ANY, AND INTEREST;
INTEREST ON OVERDUE PRINCIPAL; PRINCIPAL, PREMIUM, IF ANY, AND INTEREST RIGHTS
PRESERVED.
(a) The Notes shall accrue interest as provided in the related
Trust Issuance Certificate or Series Supplement, if any, at the applicable Note
Interest Rate specified therein, and such interest shall be payable on each
Payment Date as specified therein. Any installment of interest, principal or
premium, if any, payable on any Note which is punctually paid or duly provided
for on the applicable Payment Date shall be paid to the Person in whose name
such Note (or one or more Predecessor Notes) is registered on the Record Date
for such Payment Date, by check mailed first-class, postage prepaid to such
Person's address as it appears on the Note Register on such Record Date or in
such other manner as may be provided in the related Trust Issuance Certificate
or Series Supplement, if any, except that (i) upon application to the Indenture
Trustee by any Holder owning Notes of any Class in the principal amount of
$10,000,000 or more not later than the applicable Record Date payment will be
made by wire transfer to an account maintained by such Holder and (ii) with
respect to Book Entry Notes payments will be made by
9
<PAGE>
wire transfer in immediately available funds to the account designated by the
Holder of the applicable Global Note unless and until such Global Note is
exchanged for Definitive Notes (in which event payments shall be made as
provided above) and except for the final installment of principal and
premium, if any, payable with respect to such Note on a Payment Date which
shall be payable as provided below. The funds represented by any such checks
returned undelivered shall be held in accordance with Section 3.03 hereof
(b) The principal of each Note of each Series (and, if applicable,
Class) shall be paid, to the extent funds are available therefor in the
Collection Account, in installments on each Payment Date specified in the
related Trust Issuance Certificate or Series Supplement, if any. Notwithstanding
the foregoing, the entire unpaid principal amount of the Notes of a Series shall
be due and payable, if not previously paid, on the date on which an Event of
Default shall have occurred and be continuing with respect to such Series, if
the Indenture Trustee or the Holders of the Notes representing not less than a
majority of the Outstanding Amount of the Notes of all Series have declared the
Notes to be immediately due and payable in the manner provided in Section 5.02.
All payments of principal and premium, if any, on the Notes of any Series shall
be made pro rata to the Holders entitled thereto unless otherwise provided in
the related Trust Issuance Certificate or Series Supplement, if any, with
respect to any Class of Notes included in such Series. The Indenture Trustee
shall notify the Person in whose name a Note is registered at the close of
business on the Record Date preceding the Payment Date on which the Note Issuer
expects that the final installment of principal of and premium, if any, and
interest on such Note will be paid. Such notice shall be mailed no later than
five days prior to such final Payment Date and shall specify that such final
installment will be payable only upon presentation and surrender of such Note
and shall specify the place where such Note may be presented and surrendered for
payment of such installment. Notices in connection with redemptions of Notes
shall be mailed to Holders as provided in Section 10.02.
(c) If interest on the Notes of any Series is not paid when due,
such defaulted interest shall be paid (plus interest on such defaulted interest
at the applicable Note Interest Rate to the extent lawful) to the Persons who
are Holders on a subsequent Special Record Date, which date shall be at least
five Business Days prior to the Special Payment Date. The Note Issuer shall fix
or cause to be fixed any such Special Record Date and Special Payment Date, and,
at least 20 days before any such Special Record Date, the Note Issuer shall mail
to each affected Holder a notice that states the Special Record Date, the
Special Payment Date and the amount of defaulted interest (plus interest on such
defaulted interest) to be paid.
SECTION 2.09. CANCELLATION. All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall be promptly canceled by the Indenture Trustee. The Note Issuer may at
any time deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Note Issuer may have acquired in
any manner whatsoever, and all Notes so delivered shall be promptly canceled by
the Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange
for any Notes canceled as
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provided in this Section, except as expressly permitted by this Indenture.
All canceled Notes may be held or disposed of by the Indenture Trustee in
accordance with its standard retention or disposal policy as in effect at the
time.
SECTION 2.10. OUTSTANDING AMOUNT; AUTHENTICATION AND DELIVERY OF
NOTES. The aggregate Outstanding Amount of Notes that may be authenticated and
delivered under this Indenture shall be limited as provided in Section 3.08
hereof.
Notes of each Series created and established by a Trust Issuance
Certificate or Series Supplement, if any, may from time to time be executed by
the Note Issuer and delivered to the Indenture Trustee for authentication and
thereupon the same shall be authenticated and delivered by the Indenture Trustee
upon Issuer Request and upon delivery by the Note Issuer to the Indenture
Trustee, and receipt by the Indenture Trustee, or the causing to occur by the
Note Issuer, of the following; PROVIDED, HOWEVER, that compliance with such
conditions and delivery of such documents shall only be required in connection
with the original issuance of a Note or Notes of such Series:
(1) NOTE ISSUER ACTION. An Issuer Order authorizing and directing
the execution, authentication and delivery of the Notes by the
Indenture Trustee and specifying the principal amount of Notes
to be authenticated.
(2) AUTHORIZATIONS. A Funding Order related to such Series which
shall be in full force and effect and be Final.
(3) OPINIONS.
(a) An Opinion of Counsel that the applicable Funding
Order is in full force and effect and Final and that
no other authorization, approval or consent of any
governmental body or bodies at the time having
jurisdiction in the premises is required for the valid
issuance, authentication and delivery of such Notes,
except for such registrations as are required under
the Blue Sky and securities laws of any State or such
authorizations, approvals or consents of governmental
bodies that have been obtained and copies of which
have been delivered with such Opinion of Counsel.
(b) An Opinion of Counsel that no authorization, approval
or consent of any governmental body or bodies at the
time having jurisdiction in the premises is required
for the valid execution and delivery by the Note
Issuer of each of the Basic Documents to which the
Note Issuer is a party, except for such
authorizations, approvals or consents of governmental
bodies that have been obtained and copies of which
have been delivered with such Opinion of Counsel.
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(4) AUTHORIZING CERTIFICATE. An Officer's Certificate, dated the
Series Issuance Date, of the Note Issuer certifying that (i)
the Note Issuer has duly authorized the execution and delivery
of this Indenture and the related Trust Issuance Certificate or
Series Supplement, as the case may be, and the execution and
delivery of the Notes of such Series and (ii) that the Trust
Issuance Certificate or Series Supplement, as the case may be,
for such Series of Notes is in the form attached thereto, which
Trust Issuance Certificate or Series Supplement, as the case
may be, shall comply with the requirements of Section 2.02
hereof.
(5) THE NOTE COLLATERAL. The Note Issuer shall have made or caused
to be made all filings with the ICC pursuant to the Funding
Order and the Funding Law and all other filings necessary to
perfect the Grant of the Note Collateral to the Indenture
Trustee and the lien of this Indenture.
(6) CERTIFICATES OF THE NOTE ISSUER AND THE GRANTEE.
(a) An Officer's Certificate from the Note Issuer, dated
as of the Series Issuance Date:
(i) to the effect that (A) the Note Issuer is not in
Default under this Indenture and that the
issuance of the Notes applied for will not result
in any Default or in any breach of any of the
terms, conditions or provisions of or constitute
a default under the Funding Order or any
indenture, mortgage, deed of trust or other
agreement or instrument to which the Note Issuer
is a party or by which it or its property is
bound or any order of any court or administrative
agency entered in any Proceeding to which the
Note Issuer is a party or by which it or its
property may be bound or to which it or its
property may be subject; and (B) that all
conditions precedent provided in this Indenture
relating to the execution, authentication and
delivery of the Notes applied for have been
complied with;
(ii) to the effect that the Note Issuer has not
assigned any interest or participation in the
Note Collateral except for the Grant contained in
this Indenture; the Note Issuer has the power and
right to Grant the Note Collateral to the
Indenture Trustee as security hereunder; and the
Note Issuer, subject to the terms of this
Indenture, has Granted to the Indenture Trustee
all of its right, title and interest in and to
such Note Collateral free and clear of any lien,
mortgage, pledge, charge, security interest,
adverse claim or other encumbrance arising as a
result of
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actions of the Note Issuer or through
the Note Issuer, except the lien of this
Indenture;
(iii) to the effect that the Note Issuer has
appointed the firm of Independent certified
public accountants as contemplated in Section
8.06 hereof;
(iv) to the effect that attached thereto are duly
executed, true and complete copies of the Grant
Agreement and the Sale Agreement or Subsequent
Grant Agreement and Subsequent Sale Agreement, as
applicable, and the Servicing Agreement; and
(v) stating that all filings with the ICC pursuant to
the Funding Law and the Funding Order and all UCC
financing statements with respect to the Note
Collateral which are required to be filed by the
terms of the Funding Order, the Funding Law, the
Grant Agreement and the Sale Agreement or
Subsequent Grant Agreement and Subsequent Sale
Agreement, as applicable, the Servicing Agreement
and this Indenture have been filed as required.
(b) An Officer's Certificate from the Grantee, dated as of
the Series Issuance Date, to the effect that, in the
case of the Intangible Transition Property,
immediately prior to the conveyance thereof to the
Note Issuer pursuant to the Sale Agreement or the
Subsequent Sale Agreement, as applicable:
(i) the Grantee was the owner of such Intangible
Transition Property, free and clear of any Lien;
the Grantee had not assigned any interest or
participation in such Intangible Transition
Property and the proceeds thereof other than to
the Note Issuer pursuant to the Sale Agreement or
Subsequent Sale Agreement, as applicable; the
Grantee has the power and right to convey such
Intangible Transition Property and the proceeds
thereof to the Note Issuer; and the Grantee,
subject to the terms of the Sale Agreement or the
Subsequent Sale Agreement, as applicable, has
validly conveyed to the Note Issuer all of its
right, title and interest in and to such
Intangible Transition Property and the proceeds
thereof, free and clear of any lien, mortgage,
pledge, charge, security interest, adverse claim
or other encumbrance; and
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(ii) the attached copy of the Funding Order creating
such Intangible Transition Property is true and
correct.
(7) OPINION OF TAX COUNSEL. Illinois Power shall have delivered to
the Grantee, the Note Issuer, the Delaware Trustee and the
Indenture Trustee an opinion of independent tax counsel and/or
a ruling from the Internal Revenue Service (as selected by, and
in form and substance reasonably satisfactory to, Illinois
Power) to the effect that, for federal income tax purposes,
(i) such issuance of Notes, and transfer of the Note Proceeds
to Illinois Power, will not result in gross income to the
Grantee, the Note Issuer or Illinois Power and (ii) such
issuance will not materially adversely affect the
characterization of any then Outstanding Notes as obligations
of Illinois Power.
(8) OPINION OF COUNSEL. Unless otherwise specified in a Trust
Issuance Certificate or Series Supplement, if any, an Opinion
of Counsel, portions of which may be delivered by counsel for
the Note Issuer, portions of which may be delivered by counsel
for the Grantee and the Servicer, and portions of which may be
delivered by counsel for the Indenture Trustee, dated the
Series Issuance Date, in each case subject to the customary
exceptions, qualifications and assumptions contained therein,
to the collective effect that:
(a) the Indenture has been duly qualified under the Trust
Indenture Act and either the related Trust Issuance
Certificate or Series Supplement, if any, has been
duly qualified under the Trust Indenture Act or no
such qualification of the Trust Issuance Certificate
or Series Supplement is necessary;
(b) all instruments furnished to the Indenture Trustee
pursuant to this Indenture conform to the requirements
set forth in this Indenture and constitute all of the
documents required to be delivered hereunder for the
Indenture Trustee to authenticate and deliver the
Notes applied for, and all conditions precedent
provided for in this Indenture relating to the
authentication and delivery of the Notes have been
complied with;
(c) the Note Issuer has the power and authority to execute
and deliver the Trust Issuance Certificate, the Series
Supplement, if any, and this Indenture and to issue
the Notes, and each of the Trust Issuance Certificate,
the Series Supplement, if any, this Indenture, and the
Notes have been duly authorized and the Note Issuer is
duly formed
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and is validly existing in good standing under the
laws of the jurisdiction of its organization;
(d) the Trust Issuance Certificate, the Series Supplement,
if any, and the Indenture have been duly executed and
delivered by the Note Issuer;
(e) the Notes applied for have been duly authorized and
executed and, when authenticated in accordance with
the provisions of the Indenture and delivered against
payment of the purchase price therefor, will
constitute valid and binding obligations of the Note
Issuer (subject to bankruptcy, insolvency,
reorganization and other similar laws affecting the
rights of creditors generally and general principles
of equity), entitled to the benefits of the Indenture
and any related Trust Issuance Certificate or Series
Supplement;
(f) this Indenture, the Grant Agreement or the Subsequent
Grant Agreement as applicable, the Sale Agreement or
the Subsequent Sale Agreement as applicable, the
Servicing Agreement and the related Trust Issuance
Certificate or Series Supplement, if any, are valid
and binding agreements of the Note Issuer, enforceable
in accordance with their respective terms, except as
such enforceability may be subject to bankruptcy,
insolvency, reorganization and other similar laws
affecting the rights of creditors generally and
general principles of equity (regardless of whether
such enforceability is considered in a proceeding in
equity or at law);
(g) in accordance with the Funding Law, the Funding Order
(A) creates Intangible Transition Property in an
amount not less than the amount, if any, specified in
the Trust Issuance Certificate or Series Supplement,
if any, which was vested by the Funding Order in the
Grantee; (B) approves and authorizes the sale,
transfer and assignment by the Grantee of such
Intangible Transition Property to the Note Issuer; (C)
approves the issuance and sale by the Note Issuer of
the Notes to be issued on such Series Issuance Date in
an aggregate principal amount which equals or exceeds
the initial Outstanding Amount of the Notes referred
to in (1) above; and (D) declares and establishes that
such Notes are Transitional Funding Instruments within
the meaning of Section 18-102 of the Funding Law;
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(h) (A) at the time of the issuance of such Notes the lien
of this Indenture in favor of the Holders in the
Intangible Transition Property attaches automatically;
(B) such lien has been perfected in accordance with
Section 18-107(c) of the Funding Law and in accordance
with the Funding Order; (C) such lien is valid and
enforceable against Illinois Power, the Servicer, the
Grantee, the Note Issuer, and all third parties,
including judgment lien creditors; and (D) such lien
ranks prior to any other lien which subsequently
attaches to the Intangible Transition Property;
(i) with respect to the Note Collateral other than the
Intangible Transition Property, upon the giving of
value by the Indenture Trustee to the Note Issuer with
respect to such Note Collateral, (A) this Indenture,
together with any related Trust Issuance Certificate
or Series Supplement, creates in favor of the
Indenture Trustee a security interest in the rights of
the Note Issuer in such Note Collateral, and such
security interest is enforceable against Illinois
Power, the Servicer, the Grantee, the Note Issuer and
all third parties, (B) such security interest is
perfected, and (C) such perfected security interest is
of first priority;
(j) either (A) the Registration Statement covering the
Notes is effective under the Securities Act and, to
such counsel's knowledge, no stop order suspending the
effectiveness of such Registration Statement has been
issued under the Securities Act and no proceedings for
that purpose have been initiated or are pending or
threatened by the SEC or (B) the Notes are exempt from
the registration requirements under the Securities
Act;
(k) the Note Issuer is not now and, assuming that the Note
Issuer uses the proceeds of the sale of the Notes for
the purpose of acquiring Intangible Transition
Property in accordance with the terms of the Sale
Agreement or the Subsequent Sale Agreement, as
applicable, following the sale of the Notes to the
underwriter, underwriters, placement agent or agents
or similar Person, neither the Note Issuer nor the
Grantee will be required to be registered under the
Investment Company Act of 1940, as amended;
(l) the Grant Agreement or Subsequent Grant Agreement, as
applicable, is a valid and binding agreement of
Illinois Power enforceable against Illinois Power in
accordance with its terms and the Sale Agreement or
Subsequent Sale Agreement as applicable, is a valid
and binding agreement of the Grantee enforceable
against
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the Grantee in accordance with its terms, except in
each case as such enforceability may be subject to
bankruptcy, insolvency, reorganization and other
similar laws affecting the rights of creditors
generally and general principles of equity (regardless
of whether such enforcement is considered in a
proceeding in equity or at law);
(m) the Servicing Agreement is a valid and binding
agreement of the Servicer enforceable against the
Servicer in accordance with its terms except as such
enforceability may be subject to bankruptcy,
insolvency, reorganization and other similar laws
affecting the rights of creditors generally and
general principles of equity (regardless of whether
such enforcement is considered in a proceeding in
equity or at law);
(n) pursuant to the Funding Order and upon the delivery of
the fully executed Sale Agreement or Subsequent Sale
Agreement as applicable to the Note Issuer and the
payment of the purchase price of the Intangible
Transition Property by the Note Issuer to the Grantee
pursuant to the Sale Agreement or Subsequent Sale
Agreement, as applicable, (i) the transfer of the
Intangible Transition Property by the Grantee to the
Note Issuer conveys the Grantee's right, title and
interest in the Intangible Transition Property to the
Note Issuer and will be treated under Illinois state
law as an absolute transfer of all of the Grantee's
right, title, and interest in the Intangible
Transition Property, other than for federal and state
income and franchise tax purposes, (ii) such transfer
of the Intangible Transition Property is perfected,
(iii) such transfer has priority over any other
assignment of the Intangible Transition Property and
(iv) the Intangible Transition Property is free and
clear of all liens created prior to its transfer to
the Note Issuer pursuant to the Sale Agreement; and
(o) such other matters as the Indenture Trustee may
reasonably require.
(9) ACCOUNTANT'S CERTIFICATE OR OPINION. Unless otherwise specified
in a Trust Issuance Certificate or a Series Supplement, if any,
a certificate or opinion, addressed to the Note Issuer and the
Indenture Trustee complying with the requirements of
Section 11.01(a) hereof, of a firm of Independent certified
public accountants of recognized national reputation to the
effect that (a) such accountants are Independent with respect
to the Note Issuer within the meaning of this Indenture, and
are independent public accountants within the meaning of the
standards of The American Institute of Certified
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Public Accountants, and (b) with respect to the Note
Collateral, they have made such calculations as they deemed
necessary for the purpose and determined that, based on the
assumptions used in calculating the initial IFCs or, if
applicable, the most recent revised IFCs, as of the Series
Issuance Date for such Series (after giving effect to the
issuance of such Series and the application of the proceeds
therefrom) such IFCs are sufficient to pay (a) Operating
Expenses when incurred, plus (b) the Overcollateralization
Amount, plus (c) interest on each Series of Notes at their
respective Note Interest Rates when due, plus (d) principal
of each Series of Notes in accordance with the Expected
Amortization Schedule.)
(10) RATING AGENCY CONDITION. The Indenture Trustee shall receive
evidence reasonably satisfactory to it that the Rating Agency
Condition will be satisfied with respect to the issuance of
such new Series.
(11) REQUIREMENTS OF TRUST ISSUANCE CERTIFICATE OR SERIES
SUPPLEMENT. Such other funds, accounts, documents
certificates, agreements, instruments or opinions as may be
required by the terms of the Trust Issuance Certificate or
Series Supplement, if any, creating such Series.
(12) OTHER REQUIREMENTS. Such other documents, certificates,
agreements, instruments or opinions as the Indenture Trustee
may reasonably require.
SECTION 2.11. BOOK-ENTRY NOTES. Unless the applicable Trust
Issuance Certificate or Series Supplement, if any, provides otherwise, all of
the related Series of Notes shall be issued in Book-Entry Form, and the Note
Issuer shall execute and the Indenture Trustee shall, in accordance with this
Section and the Issuer Order with respect to such Series, authenticate and
deliver one or more Global Notes, evidencing the Notes of such Series which
(i) shall be an aggregate original principal amount equal to the aggregate
original principal amount of such Notes to be issued pursuant to the applicable
Issuer Order, (ii) shall be registered in the name of the Clearing Agency
therefor or its nominee, which shall initially be Cede & Co., as nominee for The
Depository Trust Company, the initial Clearing Agency, (iii) shall be delivered
by the Indenture Trustee to such Clearing Agency's or such nominee's
instructions, and (iv) shall bear a legend substantially to the following
effect: "TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN THE
CLEARING AGENCY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE."
Each Clearing Agency designated pursuant to this Section 2.11 must, at
the time of its designation and at all times while it serves as Clearing Agency
hereunder, be a "clearing agency" registered under the Exchange Act and any
other applicable statute or regulation.
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No Holder of any such Series of Notes issued in Book-Entry Form shall
receive a Definitive Note representing such Holder's interest in any such Notes,
except as provided in Section 2.13 or in the applicable Trust Issuance
Certificate or Series Supplement, if any, relating to such Notes. Unless (and
until) certificated, fully registered Notes of any Series (the "Definitive
Notes") have been issued to the Holders of such Series pursuant to Section 2.13
or pursuant to any applicable Trust Issuance Certificate or Series Supplement,
if any, relating thereto:
(a) the provisions of this Section 2.11 shall be in full force and
effect;
(b) the Note Issuer, the Servicer, the Paying Agent, the Note
Registrar and the Indenture Trustee may deal with the Clearing
Agency for all purposes (including the making of distributions
on the Notes of such Series) as the authorized representatives
of the Holders of such Series;
(c) to the extent that the provisions of this Section 2.11 conflict
with any other provisions of this Indenture, the provisions of
this Section 2.11 shall control; and
(d) the rights of Holders of such Series shall be exercised only
through the Clearing Agency and the Clearing Agency
Participants and shall be limited to those established by law
and agreements between such Holders and the Clearing Agency
and/or the Clearing Agency Participants. Unless and until
Definitive Notes are issued pursuant to Section 2.13, the
initial Clearing Agency will make book-entry transfers among
the Clearing Agency Participants and receive and transmit
distributions of principal and interest on the Book-Entry Notes
to such Clearing Agency Participants.
SECTION 2.12. NOTICES TO CLEARING AGENCY. Unless and until
Definitive Notes shall have been issued to Holders of such Series pursuant to
Section 2.13 or the applicable Trust Issuance Certificate or Series Supplement,
if any, relating to such Notes, whenever notice, payment, or other communication
to the holders of Book-Entry Notes of any Series is required under this
Indenture, the Indenture Trustee, the Servicer and the Paying Agent shall give
all such notices and communications specified herein to be given to Holders of
such Series to the Clearing Agency.
SECTION 2.13. DEFINITIVE NOTES. If (i)(A) the Administrator advises
the Indenture Trustee in writing that the Clearing Agency is no longer willing
or able to properly discharge its responsibilities under any Letter of
Representations and (B) the Administrator is unable to locate a qualified
successor Clearing Agency, (ii) the Administrator, at its option, advises the
Indenture Trustee in writing that, with respect to any Series, it elects to
terminate the book-entry system through the Clearing Agency or (iii) after the
occurrence of a Servicer Default, Holders holding Notes aggregating not less
than 50% of the aggregate Outstanding Amount of any Series of Notes maintained
as Book-Entry Notes advise the Indenture Trustee, the Administrator,
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the Note Issuer and the Clearing Agency (through the Clearing Agency
Participants) in writing that the continuation of a book-entry system through
the Clearing Agency is no longer in the best interests of the Holders of such
Series, the Administrator shall notify the Clearing Agency, the Indenture
Trustee and all such Holders of such Series in writing of the occurrence of
any such event and of the availability of Definitive Notes of such Series to
the Holders of such Series requesting the same. Upon surrender to the
Indenture Trustee of the Global Notes of such Series by the Clearing Agency
accompanied by registration instructions from such Clearing Agency for
registration, the Indenture Trustee shall authenticate and deliver Definitive
Notes of such Series. None of the Note Issuer, the Note Registrar, or the
Indenture Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be fully protected in
relying on, such instructions. Upon the issuance of Definitive Notes of any
Series, all references herein to obligations with respect to such Series
imposed upon or to be performed by the Clearing Agency shall be deemed to be
imposed upon and performed by the Indenture Trustee, to the extent applicable
with respect to such Definitive Notes and the Indenture Trustee shall
recognize the Holders of the Definitive Notes as Holders hereunder.
SECTION 2.14. CUSIP NUMBER. The Note Issuer in issuing any Note or
Series of Notes may use a "CUSIP" number and, if so used, the Indenture Trustee
shall use the CUSIP number in any notices to the Holders thereof as a
convenience to such Holders; PROVIDED, that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes and that reliance may be placed only on
the other identification numbers printed on the Notes. The Note Issuer shall
promptly notify the Indenture Trustee in writing of any change in the CUSIP
number with respect to any Note.
SECTION 2.15. LETTER OF REPRESENTATIONS. Notwithstanding anything
to the contrary in this Indenture or any Series Supplement or any Trust Issuance
Certificate, the parties hereto shall comply with the terms of each Letter of
Representations.
SECTION 2.16. RELEASE OF NOTE COLLATERAL. Subject to Section 11.01,
the Indenture Trustee shall release property from the lien of this Indenture
only as specified in Section 8.02(d) or upon receipt of an Issuer Request
accompanied by an Officer's Certificate, an Opinion of Counsel and Independent
Certificates in accordance with TIA Sections 314(c) and 314(d)(l) or an Opinion
of Counsel in lieu of such Independent Certificates to the effect that the TIA
does not require any such Independent Certificates.
SECTION 2.17. SPECIAL TERMS APPLICABLE TO SUBSEQUENT TRANSFERS OF
CERTAIN NOTES.
(a) Certain Series of Notes may not be registered under the
Securities Act, or the securities laws of any other jurisdiction. Consequently,
such Unregistered Notes shall not be transferable other than pursuant to an
exemption from the registration requirements of the Securities Act and
satisfaction of certain other provisions specified herein or in the related
Trust Issuance Certificate or Series Supplement, if any. Unless otherwise
provided in the related Trust
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Issuance Certificate or Series Supplement, if any, no sale, pledge or other
transfer of any Unregistered Note (or interest therein) may be made by any
Person unless either (i) such sale, pledge or other transfer is made to a
"qualified institutional buyer" (as defined under Rule 144A under the
Securities Act) or to an "institutional accredited investor" (as described in
Rule 501(a)(l), (2), (3) or (7) under the Securities Act) and, if so
requested by the Grantee or the Indenture Trustee, such proposed transferee
executes and delivers a certificate to such effect in form and substance
satisfactory to the Indenture Trustee and the Note Issuer, or (ii) such sale,
pledge or other transfer is otherwise made in a transaction exempt from the
registration requirements of the Securities Act, in which case (A) the
Indenture Trustee shall require that both the prospective transferor and the
prospective transferee to the Indenture Trustee and the Note Issuer in
writing the facts surrounding such transfer, which certification shall be in
form and substance satisfactory to the Indenture Trustee and the Note Issuer,
and (B) the Indenture Trustee shall require a written opinion of counsel
(which shall not be at the expense of the Note Issuer, the Servicer or the
Indenture Trustee) satisfactory to the Note Issuer and the Indenture Trustee
to the effect that such transfer will not violate the Securities Act. Neither
the Grantee, the Note Issuer, nor the Indenture Trustee nor the Servicer
shall be obligated to register any Unregistered Notes under the Securities
Act, qualify any Unregistered Notes under the securities laws of any state or
provide registration rights to any purchaser or holder thereof
(b) Unless otherwise provided in the related Trust Issuance
Certificate or Series Supplement, the Unregistered Notes may not be acquired by
or for the account of a Benefit Plan and, by accepting and holding an
Unregistered Note, the Holder thereof shall be deemed to have represented and
warranted that it is not a Benefit Plan and, if requested to do so by the Note
Issuer or the Indenture Trustee, the Holder of an Unregistered Note shall
execute and deliver to the Indenture Trustee a certificate to such effect in
form and substance satisfactory to the Indenture Trustee and the Note Issuer.
(c) Unless otherwise provided in the related Trust Issuance
Certificate or Series Supplement, Unregistered Notes shall be issued in the form
of Definitive Notes, shall be in fully registered form and Sections 2.11 and
2.12 of this Indenture shall not apply thereto.
(d) Each Unregistered Note shall bear legends to the effect set
forth in subsections (a) and (b) (if subsection (b) is applicable) above.
SECTION 2.18. TAX TREATMENT. The Note Issuer and the Indenture
Trustee, by entering into this Indenture, and the Holders and any Persons
holding a beneficial interest in any Note, by acquiring any Note or interest
therein, (i) express their intention that the Notes qualify under applicable
tax law as indebtedness of Illinois Power secured by the Note Collateral and
(ii) agree to treat the Notes as indebtedness of Illinois Power secured by
the Note Collateral for the purpose of federal income, state and local income
and franchise taxes, and any other taxes imposed upon, measured by or based
upon gross or net income, unless other required by appropriate taxing
authorities.
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SECTION 2.19. STATE PLEDGE. At the Closing Date, under the laws of
the State of Illinois and the United States in effect on the Closing Date, the
State of Illinois has agreed with the Holders, pursuant to Section 18-105(b) of
the Funding Law, as follows:
"(b) The State pledges to and agrees with the holders
of any transitional funding instruments who may enter into
contracts with an electric utility, grantee, assignee or issuer
pursuant to this Article XVIII that the State will not in any way
limit, alter, impair or reduce the value of intangible transition
property created by, or instrument funding charges approved by, a
transitional funding order so as to impair the terms of any
contract made by such electric utility, grantee, assignee or
issuer with such holders or in any way impair the rights and
remedies of such holders until the pertinent grantee instruments
or, if the related transitional funding order does not provide
for the issuance of grantee instruments, the transitional funding
instruments and interest, premium and other fees, costs and
charges related thereto, as the case may be, are fully paid and
discharged. Electric utilities, grantees and issuers are
authorized to include these pledges and agreements of the State
in any contract with the holders of transitional funding
instruments or with any assignees pursuant to this Article XVIII
and any assignees are similarly authorized to include these
pledges and agreements of the State in any contract with any
issuer, holder or any other assignee. Nothing in this Article
XVIII shall preclude the State of Illinois from requiring
adjustments as may otherwise be allowed by law to the electric
utility's base rates, transition charges, delivery services
charges, or other charges for tariffed services, so long as any
such adjustment does not directly affect or impair any instrument
funding charges previously authorized by a transitional funding
order issued by the [ICC]."
As a result of the foregoing pledge, the State of Illinois may not, except as
provided in the succeeding sentence, in any way limit, alter, impair or reduce
the value of the ITP or the IFCs in a manner substantially impairing this
Indenture or the rights and remedies of the Holders (and, consequently, may not
revoke, reduce, postpone or terminate any Funding Order or the rights of the
Holders to receive IFC Payments and all other proceeds of the 1998 Transition
Property), until the Notes, together with interest thereon, are fully paid and
discharged. Notwithstanding the immediately preceding sentence, the State of
Illinois would be allowed to effect a temporary impairment of the Holders'
rights if it could be shown that such impairment was necessary to advance a
significant and legitimate public purpose.
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ARTICLE III
COVENANTS
SECTION 3.01. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST.
The principal of and premium, if any, and interest on the Notes will be duly and
punctually paid in accordance with the terms of the Notes and this Indenture.
Amounts properly withheld under the Code or other tax laws by any Person from a
payment to any Holder of interest or principal or premium, if any, shall be
considered as having been paid by the Note Issuer to such Holder for all
purposes of this Indenture.
SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY. The Note Issuer will
maintain in Chicago, Illinois, an office or agency [INSERT ADDRESS] where Notes
may be surrendered for registration of transfer or exchange. The Note Issuer
hereby initially appoints the Indenture Trustee to serve as its agent for the
foregoing purposes. The Note Issuer will give prompt written notice to the
Indenture Trustee of the location, and of any change in the location, of any
such office or agency. If at any time the Note Issuer shall fail to maintain any
such office or agency or shall fail to furnish the Indenture Trustee with the
address thereof, such surrenders may be made at the Corporate Trust Office of
the Indenture Trustee, and the Note Issuer hereby appoints the Indenture Trustee
as its agent to receive all such surrenders.
SECTION 3.03. MONEY FOR PAYMENTS TO BE HELD IN TRUST. As provided
in Section 8.02(a), all payments of amounts due and payable with respect to any
Notes that are to be made from amounts withdrawn from the Collection Account
pursuant to Section 8.02(d) shall be made on behalf of the Note Issuer by the
Indenture Trustee or by another Paying Agent, and no amounts so withdrawn from
the Collection Account for payments with respect to any Notes shall be paid over
to the Note Issuer except as provided in this Section and Section 8.02.
The Note Issuer will cause each Paying Agent other than the Indenture
Trustee to execute and deliver to the Indenture Trustee an instrument in which
such Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of
this Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due
with respect to the Notes in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(ii) give the Indenture Trustee written notice of any default
by the Note Issuer of which it has actual knowledge in the making of
any payment required to be made with respect to the Notes;
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(iii) at any time during the continuance of any such default,
upon the written request of the Indenture Trustee, forthwith pay to
the Indenture Trustee all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to
the Indenture Trustee all sums held by it in trust for the payment of
Notes if at any time it determines that it has ceased to meet the
standards required to be met by a Paying Agent at the time of such
determination; and
(v) comply with all requirements of the Code and other tax
laws with respect to the withholding from any payments made by it on
any Notes of any applicable withholding taxes imposed thereon and with
respect to any applicable reporting requirements in connection
therewith.
The Note Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct any Paying Agent to pay to the Indenture Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Indenture Trustee upon
the same trusts as those upon which the sums were held by such Paying Agent; and
upon such payment by any Paying Agent to the Indenture Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Indenture Trustee or any Paying Agent in trust for the payment of
any amount due with respect to any Note and remaining unclaimed for two years
after such amount has become due and payable shall be discharged from such trust
and be paid to the Note Issuer on an Issuer Request; and, subject to Section
11.16, the Holder of such Note shall thereafter, as an unsecured general
creditor, look only to the Note Issuer for payment thereof (but only to the
extent of the amounts so paid to the Note Issuer), and all liability of the
Indenture Trustee or such Paying Agent with respect to such trust money shall
thereupon cease; PROVIDED, HOWEVER, that the Indenture Trustee or such Paying
Agent, before being required to make any such repayment, may at the expense of
the Note Issuer, cause to be published once, in a newspaper published in the
English language, customarily published on each Business Day and of general
circulation in the City of Chicago, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Note Issuer. The Indenture Trustee may also adopt and
employ, at the expense of the Note Issuer, any other reasonable means of
notification of such repayment (including, but not limited to, mailing notice of
such repayment to Holders whose Notes have been called but have not been
surrendered for redemption or whose right to or interest in moneys due and
payable but not claimed is determinable from the records of the Indenture
Trustee or of any Paying Agent, at the last address of record for each such
Holder).
SECTION 3.04. EXISTENCE. The Note Issuer will keep in full effect
its existence, rights and franchises as a business trust under the laws of the
State of Delaware (unless it
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becomes, or any successor Note Issuer hereunder is or becomes, organized
under the laws of any other State or of the United States of America, in
which case the Note Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Note Collateral and each
other instrument or agreement included in the Note Collateral.
SECTION 3.05. PROTECTION OF NOTE COLLATERAL. The Note Issuer will
from time to time execute and deliver all such supplements and amendments hereto
and all filings with the ICC pursuant to the Funding Order or to the Funding Law
and all financing statements, continuation statements, instruments of further
assurance and other instruments, and will take such other action necessary or
advisable to:
(i) maintain or preserve the lien and security interest (and
the priority thereof) of this Indenture or carry out more effectively
the purposes hereof,
(ii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iii) enforce any of the Note Collateral;
(iv) preserve and defend title to the Note Collateral and the
rights of the Indenture Trustee and the Holders in such Note
Collateral against the Claims of all Persons and parties, including
the challenge by any party to the validity or enforceability of any
Funding Order, any Tariff, the Intangible Transition Property or any
proceeding relating thereto and institute any action or proceeding
necessary to compel performance by the ICC or the State of Illinois of
any of its obligations or duties under the Funding Law, the State
Pledge, or any Funding Order; or
(v) pay any and all taxes levied or assessed upon all or any
part of the Note Collateral.
The Note Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any filings with the ICC, financing statements,
continuation statements or other instrument required by the Indenture Trustee
pursuant to this Section, it being understood that the Indenture Trustee
shall have no such obligation or any duty to prepare such documents.
SECTION 3.06. OPINIONS AS TO NOTE COLLATERAL.
(a) On the Series Issuance Date for each Series (including the
Closing Date), the Note Issuer shall furnish to the Indenture Trustee an Opinion
of Counsel either stating that, in the opinion of such counsel, such action has
been taken with respect to the recording and filing of this Indenture, any
indentures supplemental hereto, and any other requisite documents, and with
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respect to the execution and filing of any filings with the ICC pursuant to
the Funding Law and the applicable Funding Order and any financing statements
and continuation statements, as are necessary to perfect and make effective
the lien and security interest of this Indenture and reciting the details of
such action, or stating that, in the opinion of such counsel, no such action
is necessary to make such lien and security interest effective.
(b) On or before September 30 in each calendar year, while any
Series is outstanding, beginning on September 30, 1999, the Note Issuer shall
furnish to the Indenture Trustee an Opinion of Counsel either stating that, in
the opinion of such counsel, such action has been taken with respect to the
recording, filing, re-recording and refiling of this Indenture, any indentures
supplemental hereto and any other requisite documents and with respect to the
execution and filing of any filings with the ICC pursuant to the Funding Law and
the Funding Order and any financing statements and continuation statements as is
necessary to maintain the lien and security interest created by this Indenture
and reciting the details of such action or stating that in the opinion of such
counsel no such action is necessary to maintain such lien and security interest.
Such Opinion of Counsel shall also describe the recording, filing, re-recording
and refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and the execution and filing of any filings with the ICC,
financing statements and continuation statements that will, in the opinion of
such counsel, be required to maintain the lien and security interest created by
this Indenture until September 30 in the following calendar year.
(c) Prior to the effectiveness of any Subsequent Sale Agreement or
any amendment to any Sale Agreement, the Note Issuer shall furnish to the
Indenture Trustee an Opinion of Counsel either (A) stating that, in the opinion
of such counsel, all filings, including filings with the ICC pursuant to the
Funding Law, or the Funding Order, have been executed and filed that are
necessary fully to preserve and protect the interest of the Note Issuer and the
Indenture Trustee in the Intangible Transition Property and the proceeds
thereof, and reciting the details of such filings or referring to prior Opinions
of Counsel in which such details are given, or (B) stating that, in the opinion
of such counsel, no such action shall be necessary to preserve and protect such
interest.
SECTION 3.07. PERFORMANCE OF OBLIGATIONS; SERVICING SEC FILINGS.
(a) The Note Issuer (i) will diligently pursue any and all
actions to enforce its rights under each instrument or agreement included in
the Note Collateral and (ii) will not take any action and will use its best
efforts not to permit any action to be taken by others that would release any
Person from any of such Person's covenants or obligations under any such
instrument or agreement or that would result in the amendment, hypothecation,
subordination, termination or discharge of, or impair the validity or
effectiveness of, any such instrument or agreement, except, in each case, as
expressly provided in this Indenture, any Trust Issuance Certificate, any
Series Supplement, the Sale Agreement, any Subsequent Sale Agreement related
to the applicable Note Collateral, the Servicing Agreement, the
Administration Agreement or such other instrument or agreement.
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(b) The Note Issuer may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such duties
by a Person identified to the Indenture Trustee herein or in an Officer's
Certificate of the Note Issuer shall be deemed to be action taken by the Note
Issuer. Initially, the Note Issuer has contracted with the Administrator to
assist the Note Issuer in performing its duties under this Indenture.
(c) The Note Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Basic Documents and
in the instruments and agreements included in the Note Collateral, including,
but not limited to, filing or causing to be filed all filings with the ICC
pursuant to the Funding Law or the Funding Order, all UCC financing statements
and continuation statements required to be filed by it by the terms of this
Indenture, the Sale Agreement, any Subsequent Sale Agreement and the Servicing
Agreement in accordance with and within the time periods provided for herein and
therein.
(d) If the Note Issuer shall have knowledge of the occurrence of a
Servicer Default under the Servicing Agreement, the Note Issuer shall promptly
give written notice thereof to the Indenture Trustee and the Rating Agencies,
and shall specify in such notice the response or action, if any, the Note Issuer
has taken or is taking with respect of such default. If a Servicer Default shall
arise from the failure of the Servicer to perform any of its duties or
obligations under the Servicing Agreement with respect to the Intangible
Transition Property or the IFCs, the Note Issuer shall take all reasonable steps
available to it to remedy such failure.
(e) As promptly as possible after the giving of notice of
termination to the Servicer and the Rating Agencies of the Servicer's rights and
powers pursuant to Section [7.01] of the Servicing Agreement, the Note Issuer
shall appoint a successor Servicer (the "Successor Servicer") with the Grantee's
prior written consent thereto (which consent shall not be unreasonably
withheld), and such Successor Servicer shall accept its appointment by a written
assumption in a form acceptable to the Grantee, the Note Issuer and the
Indenture Trustee. A Person shall qualify as a Successor Servicer only if such
Person satisfies the requirements of the Servicing Agreement. If within 30 days
after the delivery of the notice referred to above, the Note Issuer shall not
have obtained such a Successor Servicer, the Indenture Trustee may petition the
ICC or a court of competent jurisdiction to appoint a Successor Servicer. In
connection with any such appointment, the Grantee may make such arrangements for
the compensation of such Successor Servicer as it and such successor shall
agree, subject to the limitations set forth below and in the Servicing
Agreement.
(f) Upon any termination of the Servicer's rights and powers
pursuant to the Servicing Agreement, the Indenture Trustee shall promptly
notify the Note Issuer, the Holders and the Rating Agencies. As soon as a
Successor Servicer is appointed, the Note Issuer shall notify the Grantee,
the Note Issuer, the Holders and the Rating Agencies of such appointment,
specifying in such notice the name and address of such Successor Servicer.
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(g) Without derogating from the absolute nature of the assignment
Granted to the Indenture Trustee under this Indenture or the rights of the
Indenture Trustee hereunder, the Note Issuer agrees that it will not, without
the prior written consent of the Indenture Trustee or the Holders of at least a
majority in Outstanding Amount of the Notes of all Series, amend, modify, waive,
supplement, terminate or surrender, or agree to any amendment, modification,
supplement, termination, waiver or surrender of, the terms of any Note
Collateral or the Basic Documents, or waive timely performance or observance by
Illinois Power, the Grantee or the Servicer under the Grant Agreement, any
Subsequent Grant Agreement, the Sale Agreement any Subsequent Sale Agreement or
the Servicing Agreement, respectively; PROVIDED, that no such consent shall be
required if (i) the Indenture Trustee shall have received an Officer's
Certificate stating that such waiver, amendment, modification, supplement or
termination shall not adversely affect in any material respect the interests of
the Holders and (ii) the Rating Agency Condition shall have been satisfied with
respect thereto. If any such amendment, modification, supplement or waiver shall
be so consented to by the Indenture Trustee or such Holders, the Note Issuer
agrees to execute and deliver, in its own name and at its own expense, such
agreements, instruments, consents and other documents as shall be necessary or
appropriate in the circumstances. The Note Issuer agrees that no such amendment,
modification, supplement or waiver shall adversely affect the rights of the
Holders of the Notes outstanding at the time of any such amendment,
modification, supplement or waiver.
(h) The Note Issuer shall, or shall cause the Administrator to,
file with the SEC such periodic reports, if any, as are required from time to
time under Section 13 of the Exchange Act.
(i) The Note Issuer shall make all filings required under the
Funding Law relating to the transfer of the ownership or security interest in
the Intangible Transition Property other than those required to be made by the
Grantee pursuant to the Basic Documents.
SECTION 3.08. CERTAIN NEGATIVE COVENANTS.
(a) The Note Issuer shall not issue Notes in an aggregate initial
Outstanding Amount (i) during the twelve-month period beginning on August 1,
1998 in excess of $864,000,000; and (ii) on any date from and after July 31,
1999, in excess of $[1,634,000,000], less the aggregate initial Outstanding
Amount of any Notes issued on or prior to July 31, 1999.
(b) So long as any Notes are Outstanding, the Note Issuer shall
not:
(i) except as expressly permitted by this Indenture,
sell, transfer, exchange or otherwise dispose of any of the properties
or assets of the Note Issuer, including those included in the Note
Collateral, unless directed to do so by the Indenture Trustee in
accordance with Article V;
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(ii) claim any credit on, or make any deduction from
the principal or premium, if any, or interest payable in respect of,
the Notes (other than amounts properly withheld from such payments
under the Code or other tax laws) or assert any claim against any
present or former Holder by reason of the payment of the taxes levied
or assessed upon any part of the Note Collateral;
(iii) terminate its existence or dissolve or liquidate
in whole or in part; or
(iv) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien of this Indenture to be
amended, hypothecated, subordinated, terminated or discharged, or
permit any Person to be released from any covenants or obligations
with respect to the Notes under this Indenture except as may be
expressly permitted hereby, (B) permit any lien, charge, excise,
claim, security interest, mortgage or other encumbrance (other than
the lien of this Indenture), to be created on or extend to or
otherwise arise upon or burden the Note Collateral or any part thereof
or any interest therein or the proceeds thereof (other than tax liens
arising by operation of law with respect to amounts not yet due) or
(C) permit the lien of this Indenture not to constitute a valid first
priority security interest in the Note Collateral; or
(v) elect to be classified as an association taxable
as a corporation for federal income tax purposes.
SECTION 3.09. ANNUAL STATEMENT AS TO COMPLIANCE. The Note Issuer
will deliver to the Indenture Trustee and the Rating Agencies not later than
September 30 of each year (commencing with September 30, 1999), an Officer's
Certificate stating, as to the Responsible Officer signing such Officer's
Certificate, that
(i) a review of the activities of the Note Issuer during the
preceding twelve months ended September 29 and of performance under
this Indenture has been made under such Responsible Officer's
supervision; and
(ii) to the best of such Responsible Officer's knowledge, based
on such review, the Note Issuer has in all material respects complied
with all conditions and covenants under this Indenture throughout such
twelve month period, or, if there has been a default in the compliance
of any such condition or covenant, specifying each such default known
to such Responsible Officer and the nature and status thereof
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SECTION 3.10. NOTE ISSUER MAY CONSOLIDATE, ETC., ONLY ON CERTAIN
TERMS.
(a) The Note Issuer shall not consolidate or merge with or into any
other Person, unless
(i) the Person (if other than the Note Issuer) formed by or
surviving such consolidation or merger shall be a Person organized and
existing under the laws of the United States of America or any State
and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee, in form and substance
satisfactory to the Indenture Trustee, the performance or observance
of every agreement and covenant of this Indenture on the part of the
Note Issuer to be performed or observed, all as provided herein and in
the applicable Trust Issuance Certificates and Series Supplements, if
any;
(ii) immediately after giving effect to such merger or
consolidation, no Default or Event of Default shall have occurred and
be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such merger or consolidation;
(iv) Illinois Power shall have delivered to the Grantee, the
Note Issuer, the Delaware Trustee and the Indenture Trustee an opinion
of independent tax counsel (as selected by, and in form and substance
reasonably satisfactory to, Illinois Power, and which may be based on
a ruling from the Internal Revenue Service) to the effect that such
consolidation or merger will not result in a material adverse federal
income tax consequence to Illinois Power, the Grantee, the Note
Issuer, the Delaware Trustee, the Indenture Trustee or the then
existing Holders;
(v) any action as is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and
(vi) the Note Issuer shall have delivered to the Indenture
Trustee an Officer's Certificate and an Opinion of Counsel each
stating that such consolidation or merger and such supplemental
indenture comply with this Section 3.10(a) and that all conditions
precedent herein provided for in this Section 3.10(a) with respect to
such transaction have been complied with (including any filing
required by the Exchange Act).
(b) Except as specifically provided herein, the Note Issuer shall
not sell, convey, exchange, transfer or otherwise dispose of any of its
properties or assets included in the Note Collateral, to any Person, unless
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(i) the Person that acquires the properties and assets of the
Note Issuer, the conveyance or transfer of which is hereby restricted
shall (A) be a United States citizen or a Person organized and
existing under the laws of the United States of America or any State,
(B) expressly assumes, by an indenture supplemental hereto, executed
and delivered to the Indenture Trustee, in form and substance
satisfactory to the Indenture Trustee, the performance or observance
of every agreement and covenant of this Indenture on the part of the
Note Issuer to be performed or observed, all as provided herein and
in the applicable Trust Issuance Certificates or Series Supplements,
if any, (C) expressly agrees by means of such supplemental indenture
that all right, title and interest so sold, conveyed, exchanged,
transferred or otherwise disposed of shall be subject and subordinate
to the rights of Holders of the Notes, (D) unless otherwise provided
in the supplemental indenture referred to in clause (B) above,
expressly agrees to indemnify, defend and hold harmless the Note
Issuer against and from any loss, liability or expense arising under
or related to this Indenture and the Notes and (E) expressly agrees by
means of such supplemental indenture that such Person (or if a group
of Persons, then one specified Person) shall make all filings with the
SEC (and any other appropriate Person) required by the Exchange Act in
connection with the Notes;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) Illinois Power shall have delivered an opinion of
independent tax counsel (as selected by, and in form and substance
reasonably satisfactory to, Illinois Power, and which may be based on
a ruling from the Internal Revenue Service) to the effect that such
transaction will not result in a material adverse federal income tax
consequence to Illinois Power, the Grantee, the Note Issuer, the
Delaware Trustee, the Indenture Trustee or the then existing Holders;
(v) any action as is necessary to maintain the lien and
security interest created by this Indenture pursuant to the Funding
Order or the Funding Law shall have been taken; and
(vi) the Note Issuer shall have delivered to the Indenture
Trustee an Officer's Certificate and an Opinion of Counsel each
stating that such sale, conveyance, exchange, transfer or other
disposition and such supplemental indenture comply with this Section
3.10(b) and that all conditions precedent herein provided for in this
Section 3.10(b) with respect to such transaction have been complied
with (including any filing required by the Exchange Act).
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SECTION 3.11. SUCCESSOR OR TRANSFEREE.
(a) Upon any consolidation or merger of the Note Issuer in
accordance with Section 3.10(a), the Person formed by or surviving such
consolidation or merger (if other than the Note Issuer) shall succeed to, and be
substituted for, and may exercise every right and power of, the Note Issuer
under this Indenture with the same effect as if such Person had been named as
the Note Issuer herein.
(b) Except as set forth in Section 6.07, upon a sale, conveyance,
exchange, transfer or other disposition of all the assets and properties of the
Note Issuer pursuant to Section 3.10(b), the Note Issuer and the Grantee will be
released from every covenant and agreement of this Indenture and the other Basic
Documents to be observed or performed on the part of the Note Issuer and the
Grantee with respect to the Notes and the Intangible Transition Property
immediately upon the delivery of written notice to the Indenture Trustee from
the Person acquiring such assets and properties stating that the Note Issuer and
the Grantee are to be so released.
SECTION 3.12. NO OTHER BUSINESS. The Note Issuer shall not engage
in any business other than financing, purchasing, owning and managing the
Intangible Transition Property and the other Note Collateral and the issuance of
the Notes in the manner contemplated by the Funding Order and this Indenture and
the Basic Documents and activities incidental thereto.
SECTION 3.13. NO BORROWING. The Note Issuer shall not issue, incur,
assume, guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes.
SECTION 3.14. SERVICER'S OBLIGATIONS. The Note Issuer shall enforce
the Servicer's compliance with all of the Servicer's material obligations under
the Servicing Agreement.
SECTION 3.15. GUARANTEES LOANS ADVANCES AND OTHER LIABILITIES.
Except as otherwise contemplated by the Sale Agreement, any Subsequent Sale
Agreement, the Servicing Agreement or this Indenture, the Note Issuer shall not
make any loan or advance or credit to, or guarantee (directly or indirectly or
by an instrument having the effect of assuring another's payment or performance
on any obligation or capability of so doing or otherwise), endorse or otherwise
become contingently liable, directly or indirectly, in connection with the
obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or
agree contingently to do so) any stock, obligations, assets or securities of, or
any other interest in, or make any capital contribution to, any other Person.
SECTION 3.16. CAPITAL EXPENDITURES. Other than the purchase of
Intangible Transition Property from the Grantee on each Series Issuance Date and
other than expenditures made out of available funds in an aggregate amount not
to exceed $25,000 in any calendar year,
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the Note Issuer shall not make any expenditure (by long-term or operating
lease or otherwise) for capital assets (either realty or personalty).
SECTION 3.17. RESTRICTED PAYMENTS. The Note Issuer shall not,
directly or indirectly, (i) pay any dividend or make any distribution (by
reduction of capital or otherwise), whether in cash, property, securities or a
combination thereof, to any owner of a beneficial interest in the Note Issuer or
otherwise with respect to any ownership or equity interest or similar security
in or of the Note Issuer, (ii) redeem, purchase, retire or otherwise acquire for
value any such ownership or equity interest or similar security or (iii) set
aside or otherwise segregate any amounts for any such purpose; PROVIDED,
HOWEVER, that, if no Event of Default shall have occurred and be continuing, the
Note Issuer may make, or cause to be made, any such distributions to any owner
of a beneficial interest in the Note Issuer or otherwise with respect to any
ownership or equity interest or similar security in or of the Note Issuer using
funds distributed to the Note Issuer pursuant to Section 8.02(d) to the extent
that such distributions would not cause the book value of the remaining equity
in the Note Issuer to decline below 0.5 percent of the original principal amount
of all Series of Notes which remain outstanding. The Note Issuer will not,
directly or indirectly, make payments to or distributions from the Collection
Account except in accordance with this Indenture and the Basic Documents.
SECTION 3.18. NOTICE OF EVENTS OF DEFAULT. The Note Issuer agrees
to give the Indenture Trustee and the Rating Agencies prompt written notice of
each Event of Default hereunder and each default on the part of the Grantee or
the Servicer of its obligations under the Sale Agreement, any Subsequent Sale
Agreement or the Servicing Agreement, respectively.
SECTION 3.19. FURTHER INSTRUMENTS AND ACTS. Upon request of the
Indenture Trustee, the Note Issuer will execute and deliver such further
instruments and do such further acts as may be reasonably necessary or proper to
carry out more effectively the purpose of this Indenture.
SECTION 3.20. PURCHASE OF SUBSEQUENT TRANSITION PROPERTY.
(a) The Note Issuer may from time to time purchase Subsequent
Transition Property from the Grantee pursuant to a Subsequent Sale Agreement,
subject to the conditions specified in paragraph (b) below.
(b) The Note Issuer shall be permitted to purchase from the Grantee
Subsequent Transition Property and the proceeds thereof only upon the
satisfaction of each of the following conditions on or prior to the related
Subsequent Sale Date:
(i) the Grantee shall have provided the Note Issuer, the
Indenture Trustee and the Rating Agencies with written notice, which
shall be given not later than 10 days prior to the related Subsequent
Sale Date, specifying the Subsequent Sale Date for such Subsequent
Transition Property and the aggregate amount of the
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IFC's related to such Subsequent Transition Property, and shall have
provided any information reasonably requested by any of the foregoing
Persons with respect to the Subsequent Transition Property then being
conveyed to the Note Issuer;
(ii) Illinois Power, the Grantee and the Note Issuer shall have
delivered to the Indenture Trustee a duly executed Subsequent Grant
Agreement in substantially the form of the Grant Agreement and a duly
executed Subsequent Sale Agreement in substantially the form of the
Sale Agreement and a filing shall have been made pursuant to Section
18-107 of the Funding Law;
(iii) as of such Subsequent Sale Date, the Grantee was not
insolvent and will not have been made insolvent by such transfer and
the Grantee is not aware of any pending insolvency with respect to
itself,
(iv) the Rating Agency Condition shall have been satisfied with
respect to such conveyance;
(v) Illinois Power shall have delivered to the Grantee, the
Note Issuer, the Delaware Trustee and the Indenture Trustee an opinion
of independent tax counsel and/or a ruling from the Internal Revenue
Service (as selected by, and in form and substance reasonably
satisfactory to, Illinois Power) to the effect that, for federal
income tax purposes (i) the ICC's issuance of the Subsequent Funding
Order creating and establishing the Subsequent Transition Property in
the Grantee, and the assignment pursuant to such Subsequent Sale
Agreement of such Subsequent Transition Property, will not result in
gross income to the Grantee, the Note Issuer or Illinois Power, and
the future revenues relating to the Subsequent Transition Property and
the assessment of the IFCs authorized in such Subsequent Funding Order
(except for revenue related to certain lump sum payments) will be
included in Illinois Power's gross income in the year in which the
related electrical service is provided to Customers, and (ii) the
assignment pursuant to such Subsequent Sale Agreement will not
adversely affect the characterization of the then Outstanding Notes as
obligations of Illinois Power;
(vi) as of such Subsequent Sale Date, no breach by Illinois
Power of its representations, warranties or covenants in the related
Subsequent Grant Agreement and no breach by the Grantee of its
representations, warranties or covenants in the related Subsequent
Sale Agreement and no Servicer Default shall exist;
(vii) as of such Subsequent Sale Date, the Note Issuer shall
have sufficient funds available to pay the purchase price for the
Subsequent Transition Property to be conveyed on such date and all
conditions to the issuance of one or
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more Series of Notes intended to provide such funds set forth in
Section 2.10 of this Indenture shall have been satisfied;
(viii) the Note Issuer shall have delivered to the Indenture
Trustee an Officer's Certificate confirming the satisfaction of each
condition precedent specified in this paragraph (b);
(ix) (A) the Note Issuer shall have delivered to the Rating
Agencies any Opinions of Counsel requested by the Rating Agencies and
(B) the Note Issuer shall have delivered to the Indenture Trustee the
Opinion of Counsel required by Section 3.06(c) of this Indenture; and
(x) the Grantee and the Note Issuer shall have taken any
action required to maintain the first perfected ownership interest of
the Note Issuer in the Subsequent Transition Property and the proceeds
thereof, and the Note Issuer shall have taken any action required to
maintain the first perfected security interest of the Indenture
Trustee in the Subsequent Transition Property and the proceeds
thereof.
ARTICLE IV
SATISFACTION AND DISCHARGE; DEFEASANCE
SECTION 4.01. SATISFACTION AND DISCHARGE OF INDENTURE DEFEASANCE.
(a) This Indenture shall cease to be of further effect with respect
to the Notes of any Series and the Indenture Trustee, on reasonable demand of
and at the expense of the Note Issuer, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture with respect to the
Notes of such Series, when
(A) either
(1) all Notes of such Series theretofore
authenticated and delivered (other than (i) Notes that have been
destroyed, lost or stolen and that have been replaced or paid as
provided in Section 2.06 and (ii) Notes for whose payment money has
theretofore been deposited in trust or segregated and held in trust by
the Note Issuer and thereafter repaid to the Note Issuer or discharged
from such trust, as provided in Section 3.03) have been delivered to
the Indenture Trustee for cancellation; or
(2) either (x)the Scheduled Maturity Date has
occurred with respect to all Notes of such Series not theretofore
delivered to the Indenture Trustee for cancellation, (y) such Notes
will be due and payable on their respective
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Scheduled Maturity Dates within one year, or (z) such Notes are to be
called for redemption within one year in accordance with the provisions
of the applicable Trust Issuance Certificate or Series Supplement, if
any, and in any such case, the Note Issuer has irrevocably deposited or
caused to be irrevocably deposited with the Indenture Trustee cash, in
trust for such purpose, in an amount sufficient to pay and discharge the
entire indebtedness on such Notes not theretofore delivered to the
Indenture Trustee for cancellation when due;
(B) the Note Issuer has paid or caused to be paid all
other sums payable hereunder by the Note Issuer with respect to such Series; and
(C) the Note Issuer has delivered to the Indenture Trustee
an Officer's Certificate, an Opinion of Counsel and (if required by the TIA or
the Indenture Trustee) an Independent Certificate from a firm of certified
public accountants, each meeting the applicable requirements of Section 11.01(a)
and each stating that all conditions precedent herein provided for relating to
the satisfaction and discharge of this Indenture with respect to Notes of such
Series have been complied with.
(b) Subject to Sections 4.01(c) and 4.02, the Note Issuer at any
time may terminate (i) all its obligations under this Indenture with respect to
the Notes of any Series ("Legal Defeasance Option") or (ii) its obligations
under Sections 3.04, 3.05, 3.06, 3.07, 3.08, 3.09, 3.10, 3.12, 3.13, 3.14, 3.15,
3.16, 3.17, 3.18 and 3.19 and the operation of Section 5.01(iv) ("Covenant
Defeasance Option") with respect to any Series of Notes. The Note Issuer may
exercise the Legal Defeasance Option with respect to any Series of Notes
notwithstanding its prior exercise of the Covenant Defeasance Option with
respect to such Series.
If the Note Issuer exercises the Legal Defeasance Option with respect
to any Series, the maturity of the Notes of such Series may not be accelerated
because of an Event of Default. If the Note Issuer exercises the Covenant
Defeasance Option with respect to any Series, the maturity of the Notes of such
Series may not be accelerated because of an Event of Default specified in
Section 5.01(iv).
Upon satisfaction of the conditions set forth herein to the exercise
of the Legal Defeasance Option or the Covenant Defeasance Option with respect to
any Series of Notes, the Indenture Trustee, on reasonable demand of and at the
expense of the Note Issuer, shall execute proper instruments acknowledging
satisfaction and discharge of the obligations that are terminated pursuant to
such exercise.
(c) Notwithstanding Sections 4.01(a) and 4.01(b) above, (i) rights
of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Holders to receive payments of
principal, premium, if any, and interest, (iv) Sections 4.03 and 4.04, (v) the
rights, obligations and immunities of the Indenture Trustee hereunder (including
the rights of the Indenture Trustee under Section 6.07 and the obligations of
the
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Indenture Trustee under Section 4.03) and (vi) the rights of Holders as
beneficiaries hereof with respect to the property deposited with the Indenture
Trustee payable to all or any of them, shall survive until the Notes of the
Series as to which this Indenture or certain obligations hereunder have been
satisfied and discharged pursuant to Section 4.01(a) or 4.01(b) have been paid
in full. Thereafter the obligations in Sections 6.07 and 4.04 with respect to
such Series shall survive.
SECTION 4.02. CONDITIONS TO DEFEASANCE. The Note Issuer may
exercise the Legal Defeasance Option or the Covenant Defeasance Option with
respect to any Series of Notes only if:
(a) the Note Issuer irrevocably deposits or causes to be
deposited in trust with the Indenture Trustee cash or U.S. Government
Obligations for the payment of principal of and premium, if any, and
interest on such Notes to the Scheduled Maturity Dates or Optional
Redemption Date therefor, as applicable;
(b) the Note Issuer delivers to the Indenture Trustee a
certificate from a nationally recognized firm of Independent
accountants expressing its opinion that the payments of principal and
interest when due and without reinvestment of the deposited U.S.
Government Obligations plus any deposited cash without investment will
provide cash at such times and in such amounts (but, in the case of
the Legal Defeasance Option only, not more than such amounts) as will
be sufficient to pay in respect of the Notes of such Series
(i) subject to clause (ii), principal in accordance with the Expected
Amortization Schedule therefor, (ii) if such Series is to be redeemed,
the Optional Redemption Price therefor on the Optional Redemption Date
and (iii) interest when due;
(c) in the case of the Legal Defeasance Option, 91 days pass
after the deposit is made and during the 91-day period no Default
specified in Section 5.01(v) or (vi) occurs which is continuing at the
end of the period;
(d) no Default has occurred and is continuing on the day of
such deposit and after giving effect thereto;
(e) in the case of an exercise of the Legal Defeasance Option,
the Note Issuer shall have delivered to the Indenture Trustee an
Opinion of Counsel stating that (i) the Note Issuer has received from,
or there has been published by, the Internal Revenue Service a ruling,
or (ii) since the date of execution of this Indenture, there has been
a change in the applicable Federal income tax law, in either case to
the effect that, and based thereon such opinion shall confirm that,
the Holders of the Notes of such Series will not recognize income,
gain or loss for Federal income tax purposes as a result of such legal
defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such legal defeasance had not occurred;
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(f) in the case of an exercise of the Covenant Defeasance
Option, the Note Issuer shall have delivered to the Indenture Trustee
an Opinion of Counsel to the effect that the Holders of the Notes of
such Series will not recognize income, gain or loss for Federal income
tax purposes as a result of such covenant defeasance and will be
subject to Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such covenant
defeasance had not occurred;
(g) the Note Issuer delivers to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel, each stating that all
conditions precedent to the satisfaction and discharge of the Notes of
such Series to the extent contemplated by this Article IV have been
complied with; and
(h) the Rating Agency Condition shall have been satisfied with
respect to the exercise of any Legal Defeasance Option or Covenant
Defeasance Option.
Before or after a deposit pursuant to this Section 4.02 with respect
to any Series of Notes, the Note Issuer may make arrangements satisfactory to
the Indenture Trustee for the redemption of such Notes at a future date in
accordance with Article X.
SECTION 4.03. APPLICATION OF TRUST MONEY. All moneys or U.S.
Government Obligations deposited with the Indenture Trustee pursuant to Section
4.01 or 4.02 hereof shall be held in trust and applied by it, in accordance with
the provisions of the Notes and this Indenture, to the payment, either directly
or through any Paying Agent, as the Indenture Trustee may determine, to the
Holders of the particular Notes for the payment or redemption of which such
moneys have been deposited with the Indenture Trustee, of all sums due and to
become due thereon for principal, premium, if any, and interest; but such moneys
need not be segregated from other funds except to the extent required herein or
in the Servicing Agreement or required by law.
SECTION 4.04. REPAYMENT OF MONEYS HELD BY PAYING AGENT. In
connection with the satisfaction and discharge of this Indenture or the Covenant
Defeasance Option or Legal Defeasance Option with respect to the Notes of any
Series, all moneys then held by any Paying Agent other than the Indenture
Trustee under the provisions of this Indenture with respect to such Notes shall,
upon demand of the Note Issuer, be paid to the Indenture Trustee to be held and
applied according to Section 3.03 and thereupon such Paying Agent shall be
released from all further liability with respect to such moneys.
ARTICLE V
REMEDIES
SECTION 5.01. EVENTS OF DEFAULT. "Event of Default" with respect to
any Series, wherever used herein, means any one of the following events
(whatever the reason for
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such Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body):
(i) default in the payment of any interest on any Note when
the same becomes due and payable, and such default shall continue for
a period of five days; or
(ii) default in the payment of the then unpaid principal of any
Note of any Series on the Final Maturity Date for such Series; or
(iii) default in the payment of the Optional Redemption Price
for any Note on the Optional Redemption Date therefor; or
(iv) default in the observance or performance in any material
respect of any covenant or agreement of the Note Issuer made in this
Indenture (other than defaults specified in clauses (i), (ii) or (iii)
above), or any representation or warranty of the Note Issuer made in
this Indenture or in any certificate or other writing delivered
pursuant hereto or in connection herewith proving to have been
incorrect in any material respect as of the time when the same shall
have been made, and such default shall continue or not be cured, or
the circumstance or condition in respect of which such
misrepresentation or warranty was incorrect shall not have been
eliminated or otherwise cured, for a period of 30 days after there
shall have been given, by registered or certified mail, to the Note
Issuer by the Indenture Trustee or to the Note Issuer and the
Indenture Trustee by the Holders of at least 25 percent of the
Outstanding Amount of the Notes of such Series, a written notice
specifying such default or incorrect representation or warranty and
requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(v) the filing of a decree or order for relief by a court
having jurisdiction in the premises in respect of the Note Issuer or
any substantial part of the Note Collateral in an involuntary case
under any applicable Federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Note Issuer or for any substantial part of the Note
Collateral, or ordering the winding-up or liquidation of the Note
Issuer's affairs, and such decree or order shall remain unstayed and
in effect for a period of 60 consecutive days; or
(vi) the commencement by the Note Issuer of a voluntary case
under any applicable Federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, or the consent by the Note
Issuer to the entry of an order for
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relief in an involuntary case under any such law, or the consent by the
Note Issuer to the appointment or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Note Issuer or for any substantial part of the Note
Collateral, or the making by the Note Issuer of any general assignment
for the benefit of creditors, or the failure by the Note Issuer
generally to pay its debts as such debts become due, or the taking of
action by the Note Issuer in furtherance of any of the foregoing; or
(vii) any act or failure to act by the State of Illinois or any
of its agencies (including the ICC), officers or employees which
violates or is not in accordance with the State Pledge; or
(viii) any other event designated as such in a Trust Issuance
Certificate or Series Supplement, if any.
The Note Issuer shall deliver to a Responsible Officer of the
Indenture Trustee and the Rating Agencies, within five days after a Responsible
Officer of the Note Issuer has actual knowledge of the occurrence thereof,
written notice in the form of an Officer's Certificate of any event (i) which is
an Event of Default under clause (vii) or (ii) which with the giving of notice
and the lapse of time would become an Event of Default under clause (iv),
including, in each case, the status of such Event of Default and what action the
Note Issuer is taking or proposes to take with respect thereto.
SECTION 5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default under clause (vii) of
Section 5.01) should occur and be continuing with respect to any Series, then
and in every such case the Indenture Trustee or the Holders of Notes
representing not less than a majority of the Outstanding Amount of the Notes of
all Series may declare all the Notes to be immediately due and payable, by a
notice in writing to the Note Issuer (and to the Indenture Trustee if given by
Holders), and upon any such declaration the unpaid principal amount of the Notes
of all Series, together with accrued and unpaid interest thereon through the
date of acceleration, shall become immediately due and payable.
At any time after such declaration of acceleration of maturity has
been made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided, the
Holders of Notes representing a majority of the Outstanding Amount of the Notes
of all Series, by written notice to the Note Issuer and the Indenture Trustee,
may rescind and annul such declaration and its consequences if:
(i) the Note Issuer has paid or deposited with the Indenture
Trustee a sum sufficient to pay:
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(A) all payments of principal of and premium, if any,
and interest on all Notes of all Series and all other amounts that
would then be due hereunder or upon such Notes if the Event of Default
giving rise to such acceleration had not occurred; and
(B) all sums paid or advanced by the Indenture
Trustee hereunder and the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee and its agents and
counsel; and
(ii) all Events of Default with respect to all Series, other
than the nonpayment of the principal of the Notes of all Series that
has become due solely by such acceleration, have been cured or waived
as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT
BY INDENTURE TRUSTEE.
(a) If an Event of Default under Section 5.01(i), (ii) or (iii)
has occurred and is continuing with respect to any Series, subject to Section
11.18, the Indenture Trustee, in its own name and as trustee of an express
trust, may institute a Proceeding for the collection of the sums so due and
unpaid, and may prosecute such Proceeding to judgment or final decree, and,
subject to the limitations on recourse set forth herein, may enforce the same
and collect in the manner provided by law out of the Note Collateral and the
proceeds thereof, the whole amount then due and payable on the Notes of such
Series for principal, premium, if any, and interest, with interest upon the
overdue principal and premium, if any, and, to the extent payment at such rate
of interest shall be legally enforceable, upon overdue installments of interest,
at the respective rate borne by the Notes of such Series or the applicable Class
of such Series and in addition thereto such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Indenture
Trustee and its agents and counsel.
(b) If an Event of Default (other than Event of Default under
clause (vii) of Section 5.01) occurs and is continuing with respect to any
Series, the Indenture Trustee may, as more particularly provided in Section
5.04, in its discretion, proceed to protect and enforce its rights and the
rights of the Holders of such Series, by such appropriate Proceedings as the
Indenture Trustee shall deem most effective to protect and enforce any such
rights, whether for the specific enforcement of any covenant or agreement in
this Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy or legal or equitable right vested in the
Indenture Trustee by this Indenture or by law.
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(c) If an Event of Default under Section 5.01(v) or (vi) has
occurred and is continuing, the Indenture Trustee, irrespective of whether the
principal of any Notes of any Series shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the
Indenture Trustee shall have made any demand pursuant to the provisions of this
Section, shall be entitled and empowered, by intervention in any Proceedings
related to such Event of Default or otherwise:
(i) to file and prove a claim or claims for the whole amount
of principal, premium, if any, and interest owing and unpaid in
respect of the Notes and to file such other papers or documents as may
be necessary or advisable in order to have the claims of the Indenture
Trustee (including any claim for reasonable compensation to the
Indenture Trustee and each predecessor Indenture Trustee, and their
respective agents, attorneys and counsel, and for reimbursement of all
expenses and liabilities incurred, and all advances made, by the
Indenture Trustee and each predecessor Indenture Trustee, except as a
result of negligence or bad faith) and of the Holders allowed in such
Proceedings;
(ii) unless prohibited by applicable law and regulations, to
vote on behalf of the Holders of Notes in any election of a trustee in
bankruptcy, a standby trustee or Person performing similar functions
in any such Proceedings; and
(iii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute all
amounts received with respect to the claims of the Holders and of the
Indenture Trustee on their behalf,
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Holders to make
payments to the Indenture Trustee, and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Holders, to pay to the
Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee except as a result of negligence or bad faith.
(d) Nothing herein contained shall be deemed to authorize the
Indenture Trustee to authorize or consent to or vote for or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any Holder in
any such proceeding except, as aforesaid, to vote for the election of a trustee
in bankruptcy or similar Person.
(e) All rights of action and of asserting claims under this
Indenture, or under any of the Notes of any Series, may be enforced by the
Indenture Trustee without the possession
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of any of the Notes of such Series or the production thereof in any trial or
other Proceedings relative thereto, and any such action or proceedings
instituted by the Indenture Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment, subject to the
payment of the expenses, disbursements and compensation of the Indenture
Trustee, each predecessor Indenture Trustee and their respective agents and
attorneys, shall be for the ratable benefit of the Holders of the Notes of
such Series.
(f) In any Proceedings brought by the Indenture Trustee (and also
any Proceedings involving the interpretation of any provision of this Indenture
to which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Holders of the Notes, and it shall not be necessary to
make any Holder a party to any such Proceedings.
SECTION 5.04. REMEDIES; PRIORITIES.
(a) If an Event of Default (other than an Event of Default under
clause (vii) of Section 5.01) shall have occurred and be continuing with respect
to a Series, the Indenture Trustee may do one or more of the following (subject
to Section 5.05):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the
Notes of such Series or under this Indenture with respect thereto,
whether by declaration of acceleration or otherwise, and, subject to
the limitations on recovery set forth herein, enforce any judgment
obtained, and collect moneys adjudged due upon such Notes;
(ii) institute Proceedings from time to time for the complete
or partial foreclosure of this Indenture with respect to the Note
Collateral;
(iii) exercise any remedies of a secured party under the UCC or
the Funding Law and take any other appropriate action to protect and
enforce the rights and remedies of the Indenture Trustee and the
Holders of the Notes of such Series; and
(iv) sell the Note Collateral or any portion thereof or rights
or interest therein, at one or more public or private sales called and
conducted in any manner permitted by law;
PROVIDED, HOWEVER, that the Indenture Trustee may not sell or otherwise
liquidate any portion of the Note Collateral following such an Event of Default,
other than an Event of Default described in Section 5.01(i), (ii) or (iii), with
respect to any Series unless (A) the Holders of 100 percent of the Outstanding
Amount of the Notes of all Series consent thereto, (B) the proceeds of such sale
or liquidation distributable to the Holders of all Series are sufficient to
discharge in full all amounts then due and unpaid upon such Notes for principal,
premium, if any, and interest after taking into account payment of all amounts
due prior thereto pursuant to the priorities set forth
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in Section 8.02(d) or (C) the Indenture Trustee determines that the Note
Collateral will not continue to provide sufficient funds for all payments on
the Notes of all Series as they would have become due if the Notes had not
been declared due and payable, and the Indenture Trustee obtains the consent
of Holders of 66-2/3 percent of the Outstanding Amount of the Notes of all
Series. In determining such sufficiency or insufficiency with respect to
clause (B) and (C), the Indenture Trustee may, but need not, obtain and
conclusively rely upon an opinion of an Independent investment banking or
accounting firm of national reputation as to the feasibility of such proposed
action and as to the sufficiency of the Note Collateral for such purpose
(b) If an Event of Default under clause (vii) of Section 5.01 shall
have occurred and be continuing, the Indenture Trustee, for the benefit of the
Holders, shall be entitled and empowered to the extent permitted by applicable
law, to institute or participate in Proceedings reasonably necessary to compel
performance of or to enforce the State Pledge and to collect any monetary
damages incurred by the Holders or the Indenture Trustee as a result of any such
Event of Default, and may prosecute any such Proceeding to final judgment or
decree. The rights and remedies set forth in this Section 5.04(b) and the
obligations of the Servicer under Section 5.02(c) of the Servicing Agreement
shall be the sole and exclusive remedies for such an Event of Default.
(c) If the Indenture Trustee collects any money pursuant to this
Article V, it shall pay out such money in accordance with the priorities set
forth in Section 8.02(d).
SECTION 5.05. OPTIONAL PRESERVATION OF THE NOTE COLLATERAL. If the
Notes of all Series have been declared to be due and payable under Section 5.02
following an Event of Default and such declaration and its consequences have not
been rescinded and annulled, the Indenture Trustee may, but need not, elect to
maintain possession of the Note Collateral. It is the desire of the parties
hereto and the Holders that there be at all times sufficient funds for the
payment of principal of and premium, if any, and interest on the Notes, and the
Indenture Trustee shall take such desire into account when determining whether
or not to maintain possession of the Note Collateral. In determining whether to
maintain possession of the Note Collateral, the Indenture Trustee may, but need
not, obtain and conclusively rely upon an opinion of an Independent investment
banking or accounting firm of national reputation as to the feasibility of such
proposed action and as to the sufficiency of the Note Collateral for such
purpose.
SECTION 5.06. LIMITATION OF SUITS. No Holder of any Note of any
Series shall have any right to institute any Proceeding, judicial or otherwise,
with respect to this Indenture, or for the appointment of a receiver or trustee,
or for any other remedy hereunder, unless:
(i) such Holder previously has given written notice to the
Indenture Trustee of a continuing Event of Default with respect to
such Series;
(ii) the Holders of not less than 25 percent of the Outstanding
Amount of the Notes of all Series have made written request to the
Indenture Trustee to
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institute such Proceeding in respect of such Event of Default in its
own name as Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture
Trustee indemnity satisfactory to it against the costs, expenses and
liabilities to be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of
such notice, request and offer of indemnity has failed to institute
such Proceedings; and
(v) no direction inconsistent with such written request has
been given to the Indenture Trustee during such 60-day period by the
Holders of a majority of the Outstanding Amount of the Notes of all
Series;
it being understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a majority of the Outstanding Amount of the Notes of
all Series, the Indenture Trustee in its sole discretion may determine what
action, if any, shall be taken, notwithstanding any other provisions of this
Indenture.
SECTION 5.07. UNCONDITIONAL RIGHTS OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM, IF ANY, AND INTEREST. Notwithstanding any other provisions in this
Indenture, the Holder of any Note shall have the right, which is absolute and
unconditional, (a) to receive payment of (i) the interest, if any, on such Note
on the due dates thereof expressed in such Note or in this Indenture, (ii) the
unpaid principal, if any, of such Notes on the Final Maturity Date therefor or
(iii) in the case of redemption, receive payment of the unpaid principal and
premium, if any, and interest, if any, on such Note on the Optional Redemption
Date therefor and (b) to institute suit for the enforcement of any such payment,
and such right shall not be impaired without the consent of such Holder.
SECTION 5.08. RESTORATION OF RIGHTS AND REMEDIES. If the Indenture
Trustee or any Holder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Indenture
Trustee or to such Holder, then and in every such case the Note Issuer, the
Indenture Trustee and the Holders shall, subject to any determination in such
Proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights
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and remedies of the Indenture Trustee and the Holders shall continue as though
no such Proceeding had been instituted.
SECTION 5.09. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy
herein conferred upon or reserved to the Indenture Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.10. DELAY OR OMISSION NOT A WAIVER. No delay or omission
of the Indenture Trustee or any Holder to exercise any right or remedy accruing
upon any Default or Event of Default shall impair any such right or remedy or
constitute a waiver of any such Default or Event of Default or an acquiescence
therein. Every right and remedy given by this Article V or by law to the
Indenture Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Indenture Trustee or by the Holders, as
the case may be.
SECTION 5.11. CONTROL BY HOLDERS. The Holders of a majority of the
Outstanding Amount of the Notes of all Series (or, if less than all Series or
Classes are affected, the affected Series or Class or Classes) shall have the
right to direct the time, method and place of conducting any Proceeding for any
remedy available to the Indenture Trustee with respect to the Notes of such
Series or Class or Classes or exercising any trust or power conferred on the
Indenture Trustee with respect to such Series or Class or Classes; PROVIDED that
(i) such direction shall not be in conflict with any rule of
law or with this Indenture;
(ii) subject to the express terms of Section 5.04, any
direction to the Indenture Trustee to sell or liquidate the Note
Collateral shall be by the Holders of Notes representing not less than
100 percent of the Outstanding Amount of the Notes of all Series;
(iii) if the conditions set forth in Section 5.05 have been
satisfied and the Indenture Trustee elects to retain the Note
Collateral pursuant to such Section, then any direction to the
Indenture Trustee by Holders of Notes representing less than 100
percent of the Outstanding Amount of the Notes of all Series to sell
or liquidate the Note Collateral shall be of no force and effect; and
(iv) the Indenture Trustee may take any other action deemed
proper by the Indenture Trustee that is not inconsistent with such
direction;
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PROVIDED, HOWEVER, that, the Indenture Trustee's duties shall be subject to
Section 6.01, and the Indenture Trustee need not take any action that it
determines might involve it in liability or might materially adversely affect
the rights of any Holders not consenting to such action.
SECTION 5.12. WAIVER OF PAST DEFAULTS. Prior to the declaration of
the acceleration of the maturity of the Notes of all Series as provided in
Section 5.02, the Holders of Notes representing not less than a majority of the
Outstanding Amount of the Notes of all Series may waive any past Default or
Event of Default and its consequences except a Default (a) in payment of
principal of or premium, if any, or interest on any of the Notes or (b) in
respect of a covenant or provision hereof which cannot be modified or amended
without the consent of the Holder of each Note of all Series or Classes
affected. In the case of any such waiver, the Note Issuer, the Indenture Trustee
and the Holders of the Notes shall be restored to their former positions and
rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
SECTION 5.13. UNDERTAKING FOR COSTS. All parties to this Indenture
agree, and each Holder of any Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee, (b) any suit instituted by any Holder, or group of Holders,
in each case holding in the aggregate more than 10 percent of the Outstanding
Amount of the Notes of a Series or (c) any suit instituted by any Holder for the
enforcement of the payment of (i) interest on any Note on or after the due dates
expressed in such Note and in this Indenture, (ii) the unpaid principal, if any,
of any Note on or after the Final Maturity Date therefor or (iii) in the case of
redemption, the unpaid principal of and premium, if any, and interest on any
Note on or after the Optional Redemption Date therefor.
SECTION 5.14. WAIVER OF STAY OR EXTENSION LAWS. The Note Issuer
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead or in any manner whatsoever, claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, that may affect the covenants or the performance of
this Indenture; and the Note Issuer (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it will not hinder, delay or
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impede the execution of any power herein granted to the Indenture Trustee, but
will suffer and permit the execution of every such power as though no such
law had been enacted.
SECTION 5.15. ACTION ON NOTES. The Indenture Trustee's right to
seek and recover judgment on the Notes or under this Indenture shall not be
affected by the seeking, obtaining or application of any other relief under or
with respect to this Indenture. Neither the lien of this Indenture nor any
rights or remedies of the Indenture Trustee or the Holders shall be impaired by
the recovery of any judgment by the Indenture Trustee against the Note Issuer or
by the levy of any execution under such judgment upon any portion of the Note
Collateral or any other assets of the Note Issuer.
SECTION 5.16. PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS.
(a) Promptly following a request from the Indenture Trustee to do
so and at the Note Issuer's expense, the Note Issuer agrees to take all such
lawful action as the Indenture Trustee may request to compel or secure the
performance and observance by Illinois Power, the Grantee and the Servicer, as
applicable, of each of their obligations to the Note Issuer under or in
connection with the Grant Agreement or any Subsequent Grant Agreement, the Sale
Agreement, or any Subsequent Sale Agreement and the Servicing Agreement,
respectively, in accordance with the terms thereof, and to exercise any and all
rights, remedies, powers and privileges lawfully available to the Note Issuer
under or in connection with any such agreements, respectively, to the extent and
in the manner directed by the Indenture Trustee, including the transmission of
notices of default on the part of Illinois Power, the Grantee or the Servicer
thereunder and the institution of legal or administrative actions or proceedings
to compel or secure performance by Illinois Power, the Grantee or the Servicer
of each of their respective obligations under the Grant Agreement, any
Subsequent Grant Agreement, the Sale Agreement, any Subsequent Sale Agreement
and the Servicing Agreement, respectively.
(b) If an Event of Default has occurred and is continuing, the
Indenture Trustee may, and, at the direction (which direction shall be in
writing or by telephone (confirmed in writing promptly thereafter)) of the
Holders of 66-2/3 percent of the Outstanding Amount of the Notes of all Series
shall, subject to Article VI, exercise all rights, remedies, powers, privileges
and claims of the Note Issuer against the Grantee or the Servicer under or in
connection with the Sale Agreement, any Subsequent Sale Agreement and the
Servicing Agreement, respectively, including the right or power to take any
action to compel or secure performance or observance by the Grantee or the
Servicer of each of their obligations to the Note Issuer thereunder and to give
any consent, request, notice, direction, approval, extension or waiver under the
Sale Agreement, any Subsequent Sale Agreement or the Servicing Agreement,
respectively, and any right of the Note Issuer to take such action shall be
suspended.
ARTICLE VI
THE INDENTURE TRUSTEE
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SECTION 6.01. DUTIES OF INDENTURE TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Indenture Trustee shall exercise the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties
and only such duties as are specifically set forth in this Indenture
and no implied covenants or obligations shall be read into this
Indenture against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture
Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture; however, the Indenture Trustee shall
examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability for
its own negligent action, its own negligent failure to act or its own wilful
misconduct, except that:
(i) this paragraph (c) does not limit the effect of paragraph
(b) of this Section 6.01;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is
proved that the Indenture Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Indenture Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance with
a direction received by it pursuant to Section 5.11.
(d) Every provision of this Indenture that in any way relates to
the Indenture Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Indenture Trustee shall not be liable for interest on any
money received by it except as the Indenture Trustee may agree in writing with
the Note Issuer.
(f) Money held in trust by the Indenture Trustee need not be
segregated from other funds except to the extent required by law or the terms of
this Indenture, the Sale Agreement, any Subsequent Sale Agreement and the
Servicing Agreement.
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(g) No provision of this Indenture shall require the Indenture
Trustee to expend or risk its own funds or otherwise incur financial liability
in the performance of any of its duties hereunder or in the exercise of any of
its rights or powers, if it shall have reasonable grounds to believe that
repayments of such funds or indemnity satisfactory to it against such risk or
liability is not reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of the
TIA.
(i) In the event that the Indenture Trustee is also acting as
Paying Agent or Note Registrar hereunder, the rights and protections of this
Article VI shall also be afforded to the Indenture Trustee in its capacity as
Paying Agent or Note Registrar.
(j) Except as expressly set forth in the Basic Documents, the
Indenture Trustee shall have no obligation to administer, service or collect
Intangible Transition Property or to maintain, monitor or otherwise supervise
the administration, servicing or collection of the Intangible Transition
Property.
SECTION 6.02. RIGHTS OF INDENTURE TRUSTEE.
(a) The Indenture Trustee may conclusively rely and shall be fully
protected in relying on any document believed by it to be genuine and to have
been signed or presented by the proper person. The Indenture Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from acting, it
may require and shall be entitled to receive an Officer's Certificate or an
Opinion of Counsel that such action is required or permitted hereunder. The
Indenture Trustee shall not be liable for any action it takes or omits to take
in good faith in reliance on such Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Indenture Trustee shall
not be responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it
takes or omits to take in good faith which it believes to be authorized or
within its rights or powers; PROVIDED, HOWEVER, that the Indenture Trustee's
conduct does not constitute willful misconduct, negligence or bad faith.
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(e) The Indenture Trustee may consult with counsel, and the advice
or opinion of counsel with respect to legal matters relating to this Indenture
and the Notes shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
SECTION 6.03. INDIVIDUAL RIGHTS OF INDENTURE TRUSTEE. The Indenture
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Note Issuer or its affiliates with the
same rights it would have if it were not Indenture Trustee. Any Paying Agent,
Note Registrar, co-registrar or co-paying agent may do the same with like
rights. However, the Indenture Trustee must comply with Sections 6.11 and 6.12.
SECTION 6.04. INDENTURE TRUSTEE'S DISCLAIMER. The Indenture Trustee
shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Note Issuer's use of the proceeds from the Notes, and it shall not be
responsible for any statement of the Note Issuer in the Indenture or in any
document issued in connection with the sale of the Notes or in the Notes other
than the Indenture Trustee's certificate of authentication.
SECTION 6.05. NOTICE OF DEFAULTS. If a Default occurs and is
continuing with respect to any Series and if it is actually known to a
Responsible Officer of the Indenture Trustee, the Indenture Trustee shall mail
to each Holder of Notes of all Series notice of the Default within 90 days after
it occurs. Except in the case of a Default in payment of principal of and
premium, if any, or interest on any Note, the Indenture Trustee may withhold the
notice if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of Holders. Except
as provided in the first sentence of this Section 6.05, in no event shall the
Indenture Trustee be deemed to have knowledge of a Default.
SECTION 6.06. REPORTS BY INDENTURE TRUSTEE TO HOLDERS.
(a) So long as Notes are Outstanding and the Indenture Trustee is
the Note Registrar and Paying Agent, within the prescribed period of time for
tax reporting purposes after the end of each calendar year it shall deliver to
each relevant current or former Holder such information in its possession as may
be required to enable such Holder to prepare its Federal and state income tax
returns.
(b) With respect to each Series of Notes, on or prior to each
Payment Date or Special Payment Date therefor, the Indenture Trustee will
deliver to each Holder of such Notes on such Payment Date or Special Payment
Date a statement as provided and prepared by the Servicer which will include (to
the extent applicable) the following information (and any other information so
specified in the applicable Trust Issuance Certificate or Series Supplement, if
any,)
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as to the Notes of such Series with respect to such Payment Date or Special
Payment Date or the period since the previous Payment Date, as applicable:
(i) the amount of the payment to Holders allocable to
principal, if any;
(ii) the amount of the payment to Holders allocable to
interest;
(iii) the aggregate Outstanding Amount of such Notes, after
giving effect to any payments allocated to principal reported under
(i) above; and
(iv) the difference, if any, between the amount specified in
subsection (iii) above and the Outstanding Amount specified in the
related Expected Amortization Schedule.
(c) The Note Issuer shall send a copy of each of the Certificate of
Compliance delivered to it pursuant to Section [3.03] of the Servicing Agreement
and the Annual Accountant's Report delivered to it pursuant to Section [3.04] of
the Servicing Agreement to the Rating Agencies. A copy of such certificate and
report may be obtained by any Holder by a request in writing to the Indenture
Trustee.
SECTION 6.07. COMPENSATION AND INDEMNITY. The Note Issuer shall pay
to the Indenture Trustee from time to time reasonable compensation for its
services. The Indenture Trustee's compensation shall not be limited by any law
on compensation of a trustee of an express trust. The Note Issuer shall
reimburse the Indenture Trustee for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Indenture Trustee's
agents, counsel, accountants and experts. The Note Issuer shall indemnify the
Indenture Trustee and its officers, directors, employees and agents against any
and all loss, liability or expense (including attorneys' fees and expenses)
incurred by it in connection with the administration of this trust and the
performance of its duties hereunder. The Indenture Trustee shall notify the Note
Issuer as soon as is reasonably practicable of any claim for which it may seek
indemnity. Failure by the Indenture Trustee to so notify the Note Issuer shall
not relieve the Note Issuer of its obligations hereunder. The Note Issuer shall
defend the claim and the Indenture Trustee may have separate counsel and the
Note Issuer shall pay the fees and expenses of such counsel. The Note Issuer
need not reimburse any expense or indemnify against any loss, liability or
expense incurred by the Indenture Trustee through the Indenture Trustee's own
wilful misconduct, negligence or bad faith.
The payment obligations to the Indenture Trustee pursuant to this
Section shall survive the discharge of this Indenture or the earlier resignation
or removal of the Indenture Trustee. When the Indenture Trustee incurs expenses
after the occurrence of a Default specified in Section 5.01(v) or (vi) with
respect to the Note Issuer, the expenses are intended to constitute
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expenses of administration under Title 11 of the United States Code or any
other applicable Federal or state bankruptcy, insolvency or similar law.
SECTION 6.08. REPLACEMENT OF INDENTURE TRUSTEE. The Indenture
Trustee may resign at any time by so notifying the Note Issuer, provided that no
such resignation shall be effective until either (a) the Note Collateral has
been completely liquidated and the proceeds of the liquidation distributed to
the Holders or (b) a successor trustee having the qualifications set forth in
Section 6.11 has been designated and has accepted such trusteeship. The Holders
of a majority in Outstanding Amount of the Notes of all Series may remove the
Indenture Trustee by so notifying the Indenture Trustee and may appoint a
successor Indenture Trustee. The Note Issuer shall remove the Indenture Trustee
if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) the Indenture Trustee is adjudged a bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the
Indenture Trustee or its property; or
(iv) the Indenture Trustee otherwise becomes incapable of
acting.
If the Indenture Trustee gives notice of resignation or is removed or
if a vacancy exists in the office of Indenture Trustee for any reason (the
Indenture Trustee in such event being referred to herein as the retiring
Indenture Trustee), the Note Issuer shall promptly appoint a successor Indenture
Trustee.
A successor Indenture Trustee shall deliver a written acceptance of
its appointment to the retiring Indenture Trustee and to the Note Issuer.
Thereupon the resignation or removal of the retiring Indenture Trustee shall
become effective, and the successor Indenture Trustee shall have all the rights,
powers and duties of the Indenture Trustee under this Indenture. The successor
Indenture Trustee shall mail a notice of its succession to Holders. The retiring
Indenture Trustee shall promptly transfer all property held by it as Indenture
Trustee to the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Note Issuer or the Holders of a majority in Outstanding
Amount of the Notes of all Series may petition any court of competent
jurisdiction for the appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any Holder
may petition any court of competent jurisdiction for the removal of the
Indenture Trustee and the appointment of a successor Indenture Trustee.
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Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Note Issuer's obligations under Section 6.07 shall continue
for the benefit of the retiring Indenture Trustee.
SECTION 6.09. SUCCESSOR INDENTURE TRUSTEE BY MERGER. If the
Indenture Trustee consolidates with, merges or converts into, or transfers all
or substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall be the successor Indenture Trustee;
PROVIDED, however, that if such successor Indenture Trustee is not eligible
under Section 6.11, then the successor Indenture Trustee shall be replaced in
accordance with Section 6.08.
In case at the time such successor or successors by merger, conversion
or consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
(a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the trust created by this Indenture or the Note Collateral may
at the time be located, the Indenture Trustee shall have the power and may
execute and deliver all instruments to appoint one or more Persons to act as a
co-trustee or co-trustees, or separate trustee or separate trustees, of all or
any part of the trust created by this Indenture or the Note Collateral, and to
vest in such Person or Persons, in such capacity and for the benefit of the
Holders, such title to the Note Collateral, or any part hereof, and, subject to
the other provisions of this Section, such powers, duties, obligations, rights
and trusts as the Indenture Trustee may consider necessary or desirable. No
co-trustee or separate trustee hereunder shall be required to meet the terms of
eligibility as a successor trustee under Section 6.11 and no notice to Holders
of the appointment of any co-trustee or separate trustee shall be required under
Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Indenture Trustee shall be conferred or imposed upon
and exercised or performed by the Indenture Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act
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separately without the Indenture Trustee joining in such act), except to
the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed the Indenture Trustee shall
be incompetent or unqualified to perform such act or acts, in which
event such rights, powers, duties and obligations (including the holding
of title to the Note Collateral or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Indenture
Trustee;
(ii) no trustee hereunder shall be personally liable by reason
of any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture
Trustee shall be deemed to have been given to each of the then separate trustees
and co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Indenture and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute
the Indenture Trustee, its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Indenture on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 6.11. ELIGIBILITY; DISQUALIFICATION. The Indenture Trustee
shall at all times satisfy the requirements of TIA Section 310(a) and Section
26(a)(i) of the Investment Company Act of 1940. The Indenture Trustee shall have
a combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition and it shall have a long term debt
rating of A (or the equivalent thereof) or better by all of the Rating Agencies
from which a rating is available. The Indenture Trustee shall comply with TIA
Section 310(b), including the optional provision permitted by the second
sentence of TIA Section 310(b)(9); PROVIDED, HOWEVER, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities of the Note Issuer are outstanding if
the requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
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SECTION 6.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST NOTE
ISSUER. The Indenture Trustee shall comply with TIA Section 311(a), excluding
any creditor relationship listed in TIA Section 311(b). An Indenture Trustee
who has resigned or been removed shall be subject to TIA Section 311(a) to
the extent indicated.
SECTION 6.13. REPRESENTATIONS AND WARRANTIES OF INDENTURE TRUSTEE.
The Indenture Trustee hereby represents and warrants that:
(a) the Indenture Trustee is a banking corporation validly existing
and in good standing under the laws of the State of Illinois; and
(b) the Indenture Trustee has full power, authority and legal right
to execute, deliver and perform this Indenture and the Basic Documents to which
the Indenture Trustee is a party and has taken all necessary action to authorize
the execution, delivery, and performance by it of this Indenture and such Basic
Documents.
ARTICLE VII
HOLDERS' LISTS AND REPORTS
SECTION 7.01. NOTE ISSUER TO FURNISH INDENTURE TRUSTEE NAMES AND
ADDRESSES OF HOLDERS. The Note Issuer will furnish or cause to be furnished to
the Indenture Trustee (a) not more than five days after the earlier of (i) each
Record Date with respect to each Series and (ii) three months after the last
Record Date with respect to each Series, a list, in such form as the Indenture
Trustee may reasonably require, of the names and addresses of the Holders of
Notes of such Series as of such Record Date, (b) at such other times as the
Indenture Trustee may request in writing, within 30 days after receipt by the
Note Issuer of any such request, a list of similar form and content as of a date
not more than 10 days prior to the time such list is furnished; PROVIDED,
HOWEVER, that so long as the Indenture Trustee is the Note Registrar, no such
list shall be required to be furnished.
SECTION 7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO
HOLDERS.
(a) The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Indenture Trustee as provided
in Section 7.01 and the names and addresses of Holders of Notes received by the
Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee may
destroy any list furnished to it as provided in such Section 7.01 upon receipt
of a new list so furnished.
(b) Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or under the
Notes.
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(c) The Note Issuer, the Indenture Trustee and the Note Registrar
shall have the protection of TIA Section 312(c).
SECTION 7.03. REPORTS BY NOTE ISSUER.
(a) The Note Issuer shall:
(i) so long as the Note Issuer is required to file
such documents with the SEC, provide to the Indenture Trustee, within
15 days after the Note Issuer is required to file the same with the
SEC, copies of the annual reports and of the information, documents
and other reports (or copies of such portions of any of the foregoing
as the SEC may from time to time by rules and regulations prescribe)
which the Note Issuer may be required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act;
(ii) provide to the Indenture Trustee and file with
the SEC in accordance with rules and regulations prescribed from time
to time by the SEC such additional information, documents and reports
with respect to compliance by the Note Issuer with the conditions and
covenants of this Indenture as may be required from time to time by
such rules and regulations; and
(iii) supply to the Indenture Trustee (and the
Indenture Trustee shall transmit by mail to all Holders described in
TIA Section 313(c)) such summaries of any information, documents and
reports required to be filed by the Note Issuer pursuant to clauses
(i) and (ii) of this Section 7.03 (a) as may be required by rules and
regulations prescribed from time to time by the SEC.
(b) Unless the Note Issuer otherwise determines, the fiscal year of
the Note Issuer shall end on December 31 of each year.
SECTION 7.04. REPORTS BY INDENTURE TRUSTEE. If required by TIA
Section 313(a), within 60 days after September 30 of each year, commencing with
the year after the issuance of the Notes of any Series, the Indenture Trustee
shall mail to each Holder of Notes of such Series as required by TIA Section
313(c) a brief report dated as of such date that complies with TIA
Section 313(a). The Indenture Trustee also shall comply with TIA Section 313(b);
PROVIDED, HOWEVER, that the initial report so issued shall be delivered not more
than 12 months after the initial issuance of each Series.
A copy of each report at the time of its mailing to Holders shall be
filed by the Servicer with the SEC and each stock exchange, if any, on which the
Notes are listed. The Note Issuer shall notify the Indenture Trustee in writing
if and when the Notes are listed on any stock exchange.
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ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.01. COLLECTION OF MONEY. Except as otherwise expressly
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance of
any fiscal agent or other intermediary, all money and other property payable to
or receivable by the Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it as provided in this Indenture.
Except as otherwise expressly provided in this Indenture, if any default occurs
in the making of any payment or performance under any agreement or instrument
that is part of the Note Collateral, the Indenture Trustee may take such action
as may be appropriate to enforce such payment or performance, subject to Article
VI, including the institution and prosecution of appropriate Proceedings. Any
such action shall be without prejudice to any right to claim a Default or Event
of Default under this Indenture and any right to proceed thereafter as provided
in Article V.
SECTION 8.02. COLLECTION ACCOUNT.
(a) Prior to the Series Issuance Date for the first Series of Notes
issued hereunder, the Note Issuer shall open, at the Indenture Trustee's
Corporate Trust Office, or at another Eligible Institution, one or more
segregated trust accounts in the Indenture Trustee's name for the deposit of
Estimated IFC Collections (collectively, the "Collection Account"). The
Collection Account will consist of four subaccounts: a general subaccount (the
"General Subaccount"), a reserve subaccount (the "Reserve Subaccount"), a
subaccount for the Overcollateralization Amount (the "Overcollateralization
Subaccount") and a capital subaccount (the "Capital Subaccount"). All amounts in
the Collection Account not allocated to any other subaccount shall be allocated
to the General Subaccount. Prior to the initial Payment Date, all amounts in the
Collection Account (other than funds deposited into the Capital Subaccount, up
to the Required Capital Level for any Series of Notes) shall be allocated to the
General Subaccount. All references to the Collection Account shall be deemed to
include reference to all subaccounts contained therein. Withdrawals from and
deposits to each of the foregoing subaccounts of the Collection Account shall be
made as set forth in Section 8.02(d) and (e). The Collection Account shall at
all times be maintained in an Eligible Deposit Account and only the Indenture
Trustee shall have access to the Collection Account for the purpose of making
deposits in and withdrawals from the Collection Account in accordance with this
Indenture. Funds in the Collection Account shall not be commingled with any
other moneys. All moneys deposited from time to time in the Collection Account,
all deposits therein pursuant to this Indenture, and all investments made in
Eligible Investments with such moneys, including all income or other gain from
such investments, shall be held by the Indenture Trustee in the Collection
Account as part of the Note Collateral as herein provided.
(b) The Indenture Trustee shall have sole dominion and exclusive
control over all moneys in the Collection Account and shall apply such amounts
therein as provided in this
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Section 8.02. The Indenture Trustee shall also pay from the Collection
Account any amounts requested to be paid by or to the Servicer pursuant to
Section [6.11(d)(ii)] of the Servicing Agreement.
(c) IFC Collections shall be deposited in the General Subaccount as
provided in Section [6.11] of the Servicing Agreement. All deposits to and
withdrawals from the Collection Account, all allocations to the subaccounts of
the Collection Account and any amounts to be paid to the Servicer under
Section 8.02(b) shall be made by the Indenture Trustee in accordance with the
written instructions provided by the Servicer in the Monthly Servicer's
Certificate, the Quarterly Servicer's Certificate, or upon other written notice
provided by the Servicer pursuant to Section 6.11(d)(ii) of the Servicing
Agreement, as applicable.
(d) On each Payment Date for any Series of Notes, the Indenture
Trustee shall apply all amounts on deposit in the Collection Account, including
all net earnings thereon, to pay the following amounts, in accordance with the
Quarterly Servicer's Certificate, in the following priority:
(i) all amounts owed by the Note Issuer to the Indenture
Trustee (including legal fees and expenses) shall be paid to the
Indenture Trustee (subject to Section 6.07) and all amounts owed to
the Delaware Trustee in connection with its acting as Trustee under
the Trust Agreement shall be paid to the Delaware Trustee, as
appropriate;
(ii) the Servicing Fee for such Payment Date and all unpaid
Servicing Fees for prior Payment Dates shall be paid to the Servicer;
(iii) the Administration Fee and all unpaid Administration Fees,
if any, from prior Payment Dates shall be paid to the Administrator;
(iv) so long as no Default or Event of Default shall have
occurred and be continuing or would result from such payment, all
other accrued and unpaid Operating Expenses shall be paid to the
Persons entitled thereto or, if such have been previously paid by the
Note Issuer, to the Note Issuer in reimbursement thereof; PROVIDED
that the amount paid on each Payment Date pursuant to this clause (iv)
shall not exceed $100,000;
(v) any overdue Quarterly Interest (together with, to the
extent lawful, interest on such overdue Quarterly Interest at the
applicable Note Interest Rate) and then Quarterly Interest for such
Payment Date with respect to each Series of Notes shall be paid to the
Holders of such Series of Notes;
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(vi) principal due and payable on the Notes of any Series as a
result of an Event of Default or on the Final Maturity Date of the
Notes of such Series, shall be paid to the Holders of such Series of
Notes;
(vii) Quarterly Principal for such Payment Date with respect to
each Series of Notes shall be paid to the Holders of such Series of
Notes;
(viii) unpaid Operating Expenses shall be paid to the Persons
entitled thereto or, if such have been previously paid by the Note
Issuer, to the Note Issuer or as it directs in reimbursement thereof;
(ix) the amount, if any, by which the Required Capital Level
with respect to all Outstanding Series of Notes exceeds the amount in
the Capital Subaccount as of such Payment Date shall be allocated to
the Capital Subaccount;
(x) the amount, if any, by which the Required
Overcollateralization Level with respect to all Outstanding Series of
Notes exceeds the amount in the Overcollateralization Subaccount as of
such Payment Date shall be allocated to the Overcollateralization
Subaccount;
(xi) funds up to the amount of net earnings on amounts in the
Collection Account for the prior quarter without cumulation shall be
paid to the Note Issuer, free from the lien of this Indenture;
(xii) the balance, if any, shall be allocated to the Reserve
Subaccount for distribution on subsequent Payment Dates; and
(xiii) after principal of and premium, if any, and interest on
all Notes of all Series, and all of the other foregoing amounts, have
been paid in full, the balance (including all amounts then held in the
Overcollateralization Subaccount, the Capital Subaccount and the
Reserve Subaccount), if any, shall be paid to the Note Issuer, free
from the lien of this Indenture.
All payments to the Holders of a Series pursuant to clauses (v), (vi) and (vii)
above or, in the case of clause (vi), if there is more than one Series of Notes
outstanding all payments to the Holders of all Series, shall be made to such
Holders pro rata based on the respective principal amounts of Notes of such
Series held by such Holders, unless, in the case of a Series comprised of two or
more Classes, the Trust Issuance Certificate or Series Supplement, if any, for
such Series provides otherwise. Payments in respect of principal of and premium,
if any, and interest on any Class of Notes will be made on a pro rata basis
among all the Holders of such Class,
(e) If on any Payment Date funds on deposit in the General
Subaccount are insufficient to make the payments contemplated by clauses (i)
through (vii) of Section 8.02(d)
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above, the Indenture Trustee shall (i) FIRST, draw from amounts on deposit in
the Reserve Subaccount, (ii) SECOND, draw from amounts on deposit in the
Overcollateralization Subaccount and (iii) THIRD, draw from amounts on
deposit in the Capital Subaccount, in each case, up to the amount of such
shortfall in order to make the payments contemplated by clauses (i) through
(vii) of Section 8.02(d). In addition, if on any Payment Date funds on
deposit in the General Subaccount are insufficient to make the allocations
contemplated by clauses (ix) and (x) above, the Indenture Trustee shall draw
from amounts on deposit in the Reserve Subaccount to make such allocations
notwithstanding the fact that on such Payment Date the allocation
contemplated by clause (viii) above may not have been fully satisfied.
SECTION 8.03. GENERAL PROVISIONS REGARDING THE COLLECTION ACCOUNT.
(a) So long as no Default or Event of Default shall have occurred
and be continuing, all or a portion of the funds in the Collection Account shall
be invested in Eligible Investments and reinvested by the Indenture Trustee upon
Issuer Order; PROVIDED, HOWEVER, that (i) such Eligible Investments shall not
mature later than the Business Day prior to the next Payment Date for the
related Series of Notes and (ii) such Eligible Investments shall not be sold,
liquidated or otherwise disposed of at a loss prior to the maturity thereof. All
income or other gain from investments of moneys deposited in the Collection
Account shall be deposited by the Indenture Trustee in the Collection Account,
and any loss resulting from such investments shall be charged to the Collection
Account. The Note Issuer will not direct the Indenture Trustee to make any
investment of any funds or to sell any investment held in the Collection Account
unless the security interest Granted and perfected in such account will continue
to be perfected in such investment or the proceeds of such sale, in either case
without any further action by any Person, and, in connection with any direction
to the Indenture Trustee to make any such investment or sale, if requested by
the Indenture Trustee, the Note Issuer shall deliver to the Indenture Trustee an
Opinion of Counsel, acceptable to the Indenture Trustee, to such effect. In no
event shall the Indenture Trustee be liable for the selection of Eligible
Investments or for investment losses incurred thereon. The Indenture Trustee
shall have no liability in respect of losses incurred as a result of the
liquidation of any Eligible Investment prior to its stated maturity or the
failure of the Note Issuer or the Servicer to provide timely written investment
direction. The Indenture Trustee shall have no obligation to invest or reinvest
any amounts held hereunder in the absence of written investment direction
pursuant to an Issuer Order.
(b) Subject to Section 6.01(c), the Indenture Trustee shall not in
any way be held liable by reason of any insufficiency in the Collection Account
resulting from any loss on any Eligible Investment included therein except for
losses attributable to the Indenture Trustee's failure to make payments on such
Eligible Investments issued by the Indenture Trustee, in its commercial capacity
as principal obligor and not as trustee, in accordance with their terms.
(c) If (i) the Note Issuer shall have failed to give written
investment directions for any funds on deposit in the Collection Account to the
Indenture Trustee by 11:00 a.m. Eastern Time (or such other time as may be
agreed by the Note Issuer and Indenture Trustee) on any
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Business Day; or (ii) a Default or Event of Default shall have occurred and
be continuing with respect to the Notes of any Series but the Notes of such
Series shall not have been declared due and payable pursuant to Section 5.02,
then the Indenture Trustee shall, to the fullest extent practicable, invest
and reinvest funds in the Collection Account in one or more investments which
qualify as investments in money market funds described under paragraph (d) of
the definition of Eligible Investments.
(d) The parties hereto acknowledge that the Servicer may, pursuant
to the Servicing Agreement, select Eligible Investments on behalf of the Note
Issuer.
SECTION 8.04. RELEASE OF NOTE COLLATERAL.
(a) The Indenture Trustee may, and when required by the provisions
of this Indenture shall, execute instruments to release property from the lien
of this Indenture, or convey the Indenture Trustee's interest in the same, in a
manner and under circumstances that are not inconsistent with the provisions of
this Indenture. No party relying upon an instrument executed by the Indenture
Trustee as provided in this Article VIII shall be bound to ascertain the
Indenture Trustee's authority, inquire into the satisfaction of any conditions
precedent or see to the application of any moneys.
(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding, release any remaining portion of the Note Collateral that secured
the Notes from the lien of this Indenture and release to the Note Issuer or any
other Person entitled thereto any funds then on deposit in the Collection
Account. The Indenture Trustee shall release property from the lien of this
Indenture pursuant to this Section 8.04(b) only upon receipt of an Issuer
Request accompanied by an Officer's Certificate, an Opinion of Counsel and (if
required by the TIA) Independent Certificates in accordance with TIA
Sections 314(c) and 3 14(d)(1) meeting the applicable requirements of
Section 11.01.
SECTION 8.05. OPINION OF COUNSEL. The Indenture Trustee shall
receive at least seven days' notice when requested by the Note Issuer to take
any action pursuant to Section 8.04(a), accompanied by copies of any instruments
involved, and the Indenture Trustee shall also require, as a condition to such
action, an Opinion of Counsel, in form and substance satisfactory to the
Indenture Trustee, stating the legal effect of any such action, outlining the
steps required to complete the same, and concluding that all conditions
precedent to the taking of such action have been complied with and such action
will not materially and adversely impair the security for the Notes or the
rights of the Holders in contravention of the provisions of this Indenture;
PROVIDED, HOWEVER, that such Opinion of Counsel shall not be required to express
an opinion as to the fair value of the Note Collateral. Counsel rendering any
such opinion may rely, without independent investigation, on the accuracy and
validity of any certificate or other instrument delivered to the Indenture
Trustee in connection with any such action.
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SECTION 8.06. REPORTS BY INDEPENDENT ACCOUNTANTS. As of the Closing
Date, the Note Issuer shall appoint a firm of Independent certified public
accountants of recognized national reputation for purposes of preparing and
delivering the reports or certificates of such accountants required by this
Indenture and the related Trust Issuance Certificates or Series Supplements, if
any. In the event such firm requires the Indenture Trustee to agree to the
procedures performed by such firm, the Note Issuer shall direct the Indenture
Trustee in writing to so agree; it being understood and agreed that the
Indenture Trustee will deliver such letter of agreement in conclusive reliance
upon the direction of the Note Issuer, and the Indenture Trustee makes no
independent inquiry or investigation to, and shall have no obligation or
liability in respect of the sufficiency, validity or correctness of such
procedures. Upon any resignation by such firm the Note Issuer shall provide
written notice thereof to the Indenture Trustee and shall promptly appoint a
successor thereto that shall also be a firm of Independent certified public
accountants of recognized national reputation. If the Note Issuer shall fail to
appoint a successor to a firm of Independent certified public accountants that
has resigned within 15 days after such resignation, the Indenture Trustee shall
promptly notify the Note Issuer of such failure in writing. If the Note Issuer
shall not have appointed a successor within 10 days thereafter the Indenture
Trustee shall promptly appoint a successor firm of Independent certified public
accountants of recognized national reputation; PROVIDED that the Indenture
Trustee shall have no liability with respect to such appointment if the
Indenture Trustee acted with due care with respect thereto. The fees of such
Independent certified public accountants and its successor shall be payable by
the Note Issuer.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
(a) Without the consent of the Holders of any Notes but with prior
notice to the Rating Agencies, the Note Issuer and the Indenture Trustee, when
authorized by an Issuer Order, at any time and from time to time, may enter into
one or more indentures supplemental hereto (which shall conform to the
provisions of the Trust Indenture Act as in force at the date of the execution
thereof), in form satisfactory to the Indenture Trustee, for any of the
following purposes:
(i) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Indenture Trustee any property subject or
required to be subjected to the lien of this Indenture, or to subject
to the lien of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Note Issuer,
and the assumption by any
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such successor of the covenants of the Note Issuer herein and in the
Notes contained;
(iii) to add to the covenants of the Note Issuer, for the
benefit of the Holders of the Notes, or to surrender any right or
power herein conferred upon the Note Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture which may be
inconsistent with any other provision herein or in any supplemental
indenture or to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental
indenture; PROVIDED that such action shall not, as evidenced by an
Opinion of Counsel, adversely affect the interests of the Holders of
the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI;
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
Federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA; or
(viii) to set forth the terms of any Series that has not
theretofore been authorized by a Trust Issuance Certificate or Series
Supplement, if any, or to provide for the execution and delivery of
any Swap Agreement.
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
(b) The Note Issuer and the Indenture Trustee, when authorized by
an Issuer Order, may, also without the consent of any of the Holders of the
Notes, enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to, or changing in any manner or eliminating
any of the provisions of; this Indenture or of modifying in any manner the
rights of the Holders of the Notes under this Indenture; PROVIDED, HOWEVER,
that (i) such action shall not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the
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interests of the Holders and (ii) the Rating Agency Condition shall have been
satisfied with respect thereto.
SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
The Note Issuer and the Indenture Trustee, when authorized by an Issuer
Order, also may, with prior notice to the Rating Agencies and with the
consent of the Holders of not less than a majority of the Outstanding Amount
of the Notes of each Series or Class to be affected, by Act of such Holders
delivered to the Note Issuer and the Indenture Trustee, enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of; this Indenture or of modifying in any manner the rights of the Holders of
the Notes under this Indenture; PROVIDED, HOWEVER, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Note
of each Series or Class affected thereby:
(i) change the date of payment of any installment of principal
of or premium, if any, or interest on any Note, or reduce the
principal amount thereof; the interest rate thereon or premium, if
any, with respect thereto, change any Optional Redemption Price,
change the provisions of this Indenture and the related applicable
Trust Issuance Certificate or Series Supplement, if any, relating to
the application of collections on, or the proceeds of the sale of; the
Note Collateral to payment of principal of or premium, if any, or
interest on the Notes, or change any place of payment where, or the
coin or currency in which, any Note or the interest thereon is
payable, or impair the right to institute suit for the enforcement of
the provisions of this Indenture requiring the application of funds
available therefor, as provided in Article V, to the payment of any
such amount due on the Notes on or after the respective due dates
thereof (or, in the case of optional redemption, on or after the
Optional Redemption Date);
(ii) reduce the percentage of the Outstanding Amount of the
Notes or of a Series or Class thereof; the consent of the Holders of
which is required for any such supplemental indenture, or the consent
of the Holders of which is required for any waiver of compliance with
certain provisions of this Indenture or certain defaults hereunder and
their consequences provided for in this Indenture;
(iii) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(iv) reduce the percentage of the Outstanding Amount of the
Notes required to direct the Indenture Trustee to direct the Note
Issuer to sell or liquidate the Note Collateral pursuant to Section
5.04;
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(v) modify any provision of this Section to decrease any
minimum percentage specified herein necessary to approve any
amendments to any provisions of this Indenture;
(vi) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of
interest, principal or premium, if any, due on any Note on any Payment
Date (including the calculation of any of the individual components of
such calculation);
(vii) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of the
Note Collateral or, except as otherwise permitted or contemplated
herein, terminate the lien of this Indenture on any property at any
time subject hereto or deprive the Holder of any Note of the security
provided by the lien of this Indenture; or
(viii) cause any material adverse federal income tax consequences
to Illinois Power, the Grantee, the Note Issuer, the Delaware Trustee,
the Indenture Trustee or the then existing Holders.
The Indenture Trustee may in its discretion determine whether or not
any Notes of a Series or Class would be affected by any supplemental
indenture and any such determination shall be conclusive upon the Holders of
all Notes of such Series or Class, whether theretofore or thereafter
authenticated and delivered hereunder. The Indenture Trustee shall not be
liable for any such determination made in good faith.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof
Promptly after the execution by the Note Issuer and the Indenture
Trustee of any supplemental indenture pursuant to this Section, the Note Issuer
shall mail to the Rating Agencies and the Holders of the Notes to which such
supplemental indenture relates a notice setting forth in general terms the
substance of such supplemental indenture. Any failure of the Indenture Trustee
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture.
SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing,
or permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts
created by this Indenture, the Indenture Trustee shall be entitled to
receive, and subject to Sections 6.01 and 6.02, shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture. The
Indenture Trustee may, but shall not be obligated
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to, enter into any such supplemental indenture that affects the Indenture
Trustee's own rights, duties, liabilities or immunities under this Indenture
or otherwise.
SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution
of any supplemental indenture pursuant to the provisions hereof; this Indenture
shall be and be deemed to be modified and amended in accordance therewith with
respect to each Series or Class of Notes affected thereby, and the respective
rights, limitations of rights, obligations, duties, liabilities and immunities
under this Indenture of the Indenture Trustee, the Note Issuer and the Holders
of the Notes shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments, and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.
SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT. Every amendment
of this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
SECTION 9.06. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Note Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Note Issuer, to any such supplemental indenture
may be prepared and executed by the Note Issuer and authenticated and delivered
by the Indenture Trustee in exchange for Outstanding Notes.
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.01. OPTIONAL REDEMPTION BY NOTE ISSUER. The Note Issuer
may, at its option, redeem all, but not less than all, of the Notes of a
Series (a) on any Payment Date if; after giving effect to payments that would
otherwise be made on such Payment Date, the Outstanding Amount of any such
Series of Notes has been reduced to less than five percent of the initial
principal balance thereof; or (b) if and to the extent specified in the
related Trust Issuance Certificate or Series Supplement, if any, on any
Payment Date on or prior to December 31, 2004, from the proceeds of the
issuance and sale of the Notes of any other Series. In addition, a Series of
Notes shall be subject to redemption if and to the extent provided in the
related Trust Issuance Certificate or Series Supplement, if any. In no event,
however, shall any Notes be redeemable unless the Rating Agency Condition
shall be satisfied with respect to each Rating Agency other than Moody's, to
which prior written notice of such redemption shall have been given, with
respect to any Notes which remain Outstanding after such redemption. The
redemption price in
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any case shall be equal to the outstanding principal amount of the Notes to
be redeemed plus accrued and unpaid interest thereon at the Note Interest
Rate to the Optional Redemption Date (such price being called the "Optional
Redemption Price"). If the Note Issuer shall elect to redeem the Notes of a
Series pursuant to this Section 10.01, it shall furnish written notice (which
notice shall state all items listed in Section 10.02) of such election to the
Indenture Trustee and the Rating Agencies not more than 50 and not less than
25 days prior to the Optional Redemption Date and shall deposit with the
Indenture Trustee not later than one Business Day prior to the Optional
Redemption Date the Optional Redemption Price of the Notes to be redeemed
whereupon all such Notes shall be due and payable on the Optional Redemption
Date upon the furnishing of a notice complying with Section 10.02 hereof to
each Holder of the Notes of such Series pursuant to this Section 10.01.
SECTION 10.02. FORM OF OPTIONAL REDEMPTION NOTICE. Unless otherwise
specified in the Trust Issuance Certificate or Series Supplement, if any,
relating to a Series of Notes, notice of redemption under Section 10.01 hereof
shall be given by the Indenture Trustee by first-class mail, postage prepaid,
mailed not less than five days nor more than 25 days prior to the applicable
Optional Redemption Date to each Holder of Notes to be redeemed, as of the close
of business on the Record Date preceding the applicable Optional Redemption Date
at such Holder's address appearing in the Note Register.
All notices of redemption shall state:
(1) the Optional Redemption Date;
(2) the Optional Redemption Price;
(3) the place where such Notes are to be surrendered for payment of
the Optional Redemption Price (which shall be the office or
agency of the Note Issuer to be maintained as provided in
Section 3.02 hereof);
(4) the CUSP number, if applicable; and
(5) the principal amount of Notes to be redeemed.
Notice of redemption of the Notes to be redeemed shall be given by the
Indenture Trustee in the name and at the expense of the Note Issuer. Failure to
give notice of redemption, or any defect therein, to any Holder of any Note
selected for redemption shall not impair or affect the validity of the
redemption of any other Note.
SECTION 10.03. NOTES PAYABLE ON OPTIONAL REDEMPTION DATE. Notice
of redemption having been given as provided in Section 10.02 hereof; the
Notes to be redeemed shall on the Optional Redemption Date become due and
payable at the Optional Redemption Price and (unless the Note Issuer shall
default in the payment of the Optional Redemption Price) no interest
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shall accrue on the Optional Redemption Price for any period after the date
to which accrued interest is calculated for purposes of calculating the
Optional Redemption Price.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. COMPLIANCE CERTIFICATES AND OPINIONS, ETC.
(a) Upon any application or request by the Note Issuer to the
Indenture Trustee to take any action under any provision of this Indenture, the
Note Issuer shall furnish to the Indenture Trustee (i) an Officer's Certificate
stating that all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with, (ii) an Opinion of
Counsel stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with and (iii) (if required by the TIA) an
Independent Certificate from a firm of certified public accountants meeting the
applicable requirements of this Section, except that, in the case of any such
application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or
opinion has read or has caused to be read such covenant or condition
and the definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory,
such signatory has made such examination or investigation as is
necessary to enable such signatory to express an informed opinion as
to whether or not such covenant or condition has been complied with;
and
(iv) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Note Collateral or other
property or securities with the Indenture Trustee that is to be made the
basis for the release of any property or securities subject to the lien of
this Indenture, the Note Issuer shall, in addition to any obligation imposed
in Section 11.01(a) or elsewhere in this Indenture, furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of each
person signing such
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certificate as to the fair value (within 90 days of such deposit) to the Note
Issuer of the Note Collateral or other property or securities to be so
deposited.
(ii) Whenever the Note Issuer is required to furnish to
the Indenture Trustee an Officer's Certificate certifying or stating the
opinion of any signer thereof as to the matters described in clause (i)
above, the Note Issuer shall also deliver to the Indenture Trustee an
Independent Certificate as to the same matters, if the fair value to the Note
Issuer of the securities to be so deposited and of all other such securities
made the basis of any such withdrawal or release since the commencement of
the then-current fiscal year of the Note Issuer, as set forth in the
certificates delivered pursuant to clause (i) above and this clause (ii), is
ten percent or more of the Outstanding Amount of the Notes of all Series, but
such a certificate need not be furnished with respect to any securities so
deposited, if the fair value thereof to the Note Issuer as set forth in the
related Officer's Certificate is less than the lesser of (A) $25,000 or (B)
one percent of the Outstanding Amount of the Notes of all Series.
(iii) Whenever any property or securities are to be
released from the lien of this Indenture other than pursuant to Section
8.02(d), the Note Issuer shall also furnish to the Indenture Trustee an
Officer's Certificate certifying or stating the opinion of each person
signing such certificate as to the fair value (within 90 days of such
release) of the property or securities proposed to be released and stating
that in the opinion of such person the proposed release will not impair the
security under this Indenture in contravention of the provisions hereof
(iv) Whenever the Note Issuer is required to furnish to
the Indenture Trustee an Officer's Certificate certifying or stating the
opinion of any signatory thereof as to the matters described in clause (iii)
above, the Note Issuer shall also furnish to the Indenture Trustee an
Independent Certificate as to the same matters if the fair value of the
property or securities and of all other property with respect to such Series,
or securities released from the lien of this Indenture (other than pursuant
to Section 8.02(d) hereof) since the commencement of the then-current
calendar year, as set forth in the certificates required by clause (iii)
above and this clause (iv), equals 10 percent or more of the Outstanding
Amount of the Notes of all Series, but such certificate need not be furnished
in the case of any release of property or securities if the fair value
thereof as set forth in the related Officer's Certificate is less than the
lesser of (A) $25,000 or (B) one percent of the then Outstanding Amount of
the Notes of all Series.
(v) Notwithstanding Section 2.16 or any other provision
of this Section 11.01, the Indenture Trustee may (A) collect, liquidate, sell
or otherwise dispose of the Intangible Transition Property and the other Note
Collateral as and to the extent permitted or required by the Basic Documents
and (B) make cash payments out of the Collection Account as and to the extent
permitted or required by the Basic Documents.
SECTION 11.02. FORM OF DOCUMENTS DELIVERED TO INDENTURE TRUSTEE.
In any case where several matters are required to be certified by, or covered
by an opinion of; any specified Person, it is not necessary that all such
matters be certified by, or covered by the opinion
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of; only one such Person, or that they be so certified or covered by only one
document, but one such Person may certify or give an opinion with respect to
some matters and one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or
several documents.
Any certificate or opinion of a Responsible Officer of the Note Issuer
may be based, insofar as it relates to legal matters, upon a certificate or
opinion of; or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his or her certificate or
opinion is based are erroneous. Any such certificate of a Responsible Officer or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of; or representations by, an officer or officers of
the Servicer, the Grantee, the Note Issuer or the Administrator, stating that
the information with respect to such factual matters is in the possession of the
Servicer, the Grantee, the Note Issuer or the Administrator, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Note
Issuer shall deliver any document as a condition of the granting of such
application, or as evidence of the Note Issuer 5 compliance with any term
hereof; it is intended that the truth and accuracy, at the time of the granting
of such application or at the effective date of such certificate or report (as
the case may be), of the facts and opinions stated in such document shall in
such case be conditions precedent to the right of the Note Issuer to have such
application granted or to the sufficiency of such certificate or report. The
foregoing shall not, however, be construed to affect the Indenture Trustee's
right to rely upon the truth and accuracy of any statement or opinion contained
in any such document as provided in Article VI.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 11.03. ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and except as herein otherwise expressly provided such
action shall become effective when such instrument or instruments are delivered
to the Indenture Trustee, and, where it is hereby expressly required, to the
Note Issuer. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
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purpose of this Indenture and (subject to Section 6.01) conclusive in favor of
the Indenture Trustee and the Note Issuer, if made in the manner provided in
this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration thereof or in exchange therefor or in lieu
thereof; in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Note Issuer in reliance thereon, whether or not
notation of such action is made upon such Note.
SECTION 11.04. NOTICES, ETC. TO INDENTURE TRUSTEE, NOTE ISSUER AND
RATING AGENCIES.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other documents provided or permitted by this
Indenture to be made upon, given or furnished to or filed with:
(i) the Indenture Trustee by any Holder or by the
Note Issuer shall be sufficient for every purpose hereunder if made,
given, furnished or filed in writing by facsimile transmission,
first-class mail or overnight delivery service to or with the Indenture
Trustee at its Corporate Trust Office, or
(ii) the Note Issuer by the Indenture Trustee or by
any Holder shall be sufficient for every purpose hereunder if in
writing and mailed, first-class, postage prepaid, to the Note Issuer
addressed to: Illinois Power Special Purpose Trust, Attention:
[_______________] or at any other address previously furnished in
writing to the Indenture Trustee by the Note Issuer. The Note Issuer
shall promptly transmit any notice received by it from the Holders to
the Indenture Trustee.
(b) Notices required to be given to the Rating Agencies by the Note
Issuer or the Indenture Trustee shall be in writing, personally delivered or
mailed by certified mail, return receipt requested to (i) in the case of
Moody's, to: Moody's Investors Service, Inc., ABS Monitoring Department, 99
Church Street, New York, New York 10007, (ii) in the case of Standard & Poor's,
to: Standard & Poor's Corporation, 26 Broadway (10th Floor), New York, New York
10004, Attention of Asset Backed Surveillance Department, (iii) in the case of
Fitch IBCA, to Fitch IBCA, Inc., One State Street Plaza, New York, New York
10004, Attention: ABS Surveillance, and (iv) in the case of Duff & Phelps, to
Duff & Phelps Credit Rating Co., 17 State Street, 12th Floor, New York, New York
10004, Attention: Asset- Backed Monitoring Group.
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SECTION 11.05. NOTICES TO HOLDERS WAIVER. Where this Indenture
provides for notice to Holders of any event, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if in writing and mailed,
first-class, postage prepaid to each Holder affected by such event, at such
Holder's address as it appears on the Note Register, not later than the latest
date, and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice nor any defect in any notice so mailed to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders, and any notice that is mailed in the manner herein provided shall
conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Indenture Trustee
but such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event of Holders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute a Default or
Event of Default.
SECTION 11.06. CONFLICT WITH TRUST INDENTURE ACT. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
The provisions of TIA Sections 310 through 317 that impose duties on
any person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
SECTION 11.07. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof
SECTION 11.08. SUCCESSORS AND ASSIGNS. All covenants and agreements
in this Indenture and the Notes by the Note Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee in
this Indenture shall bind its successors.
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SECTION 11.09. SEPARABILITY. In case any provision in this Indenture
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 11.10. BENEFITS OF INDENTURE. Nothing in this Indenture or
in the Notes, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, and the Holders, and any other
party secured hereunder, and any other Person with an ownership interest in any
part of the Note Collateral, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
SECTION 11.11. LEGAL HOLIDAYS. In any case where the date on which
any payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.12. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.13. COUNTERPARTS. This Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.14. RECORDING OF INDENTURE. If this Indenture is subject
to recording in any appropriate public recording offices, such recording is to
be effected by the Note Issuer and at its expense accompanied by an Opinion of
Counsel (which may be counsel to the Indenture Trustee or any other counsel
reasonably acceptable to the Indenture Trustee) to the effect that such
recording is necessary either for the protection of the Holders or any other
Person secured hereunder or for the enforcement of any right or remedy granted
to the Indenture Trustee under this Indenture.
SECTION 11.15. TRUST OBLIGATION. No recourse may be taken,
directly or indirectly, with respect to the obligations of the Note Issuer or
the Indenture Trustee on the Notes or under this Indenture or any certificate
or other writing delivered in connection herewith or therewith, against (i)
the Indenture Trustee or the Delaware Trustee in its respective individual
capacity, (ii) any owner of a beneficial interest in the Note Issuer
(including the Grantee and Illinois Power) or (iii) any partner, owner,
beneficiary, agent, officer, or employee of the Indenture Trustee or the
Delaware Trustee in its respective individual capacity, any holder of a
beneficial interest in the Indenture Trustee or of any successor or assign of
any of them in their respective individual or corporate capacities, except as
any such Person may have expressly
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agreed (it being understood that none of the Indenture Trustee, the Delaware
Trustee, the Grantee and ComEd have any such obligations in their respective
individual or corporate capacities).
SECTION 11.16. NO RECOURSE TO NOTE ISSUER. Notwithstanding any
provision of this Indenture or any Trust Issuance Certificate or any Series
Supplement to the contrary, Holders shall have no recourse against the Note
Issuer, but shall look only to the Note Collateral with respect to any amounts
due to the Holders hereunder and under the Notes.
SECTION 11.17. INSPECTION. The Note Issuer agrees that, on
reasonable prior notice, it will permit any representative of the Indenture
Trustee, during the Note Issuer's normal business hours, to examine all the
books of account, records, reports, and other papers of the Note Issuer, to
make copies and extracts therefrom, to cause such books to be audited by
Independent certified public accountants, and to discuss the Note Issuer's
affairs, finances and accounts with the Note Issuer's officers, employees,
and Independent certified public accountants, all at such reasonable times
and as often as may be reasonably requested. The Indenture Trustee shall and
shall cause its representatives to hold in confidence all such information
except to the extent disclosure may be required by law (and all reasonable
applications for confidential treatment are unavailing) and except to the
extent that the Indenture Trustee may reasonably determine that such
disclosure is consistent with its obligations hereunder. Notwithstanding
anything herein to the contrary, the foregoing shall not be construed to
prohibit (i) disclosure of any and all information that is or becomes
publicly known, or information obtained by the Indenture Trustee from sources
other than the Note Issuer, provided such parties are rightfully in
possession of such information, (ii) disclosure of any and all information
(A) if required to do so by any applicable statute, law, rule or regulation,
(B) pursuant to any subpoena, civil investigative demand or similar demand or
request of any court or regulatory authority exercising its proper
jurisdiction, (C) in any preliminary or final offering circular, registration
statement or contract or other document pertaining to the transactions
contemplated by this Indenture or the Basic Documents approved in advance by
the Note Issuer or (D) to any affiliate, independent or internal auditor,
agent, employee or attorney of the Indenture Trustee having a need to know
the same, provided that such parties agree to be bound by the confidentiality
provisions contained in this Section 11.17, or (iii) any other disclosure
authorized by the Note Issuer.
SECTION 11.18. NO PETITION. The Indenture Trustee, by entering
into this Indenture, and each Holder, by accepting a Note (or interest
therein) issued hereunder, hereby covenant and agree that they shall not,
prior to the date which is one year and one day after the termination of the
Indenture, acquiesce, petition or otherwise invoke or cause the Grantee, the
Note Issuer or the Delaware Trustee to invoke the process of any court or
government authority for the purpose of commencing or sustaining a case
against the Grantee, the Note Issuer or the Delaware Trustee under any
insolvency law or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Grantee, the Note
Issuer or the Delaware Trustee or any substantial part of its respective
property, or ordering the winding up or liquidation of the affairs of the
Grantee, the Note Issuer or the Delaware Trustee.
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IN WITNESS WHEREOF, the Note Issuer and the Indenture Trustee have
caused this Indenture to be duly executed by their respective officers,
thereunto duly authorized and duly attested, all as of the day and year first
above written.
ILLINOIS POWER SPECIAL PURPOSE TRUST
By: FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Delaware Trustee
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
HARRIS TRUST AND SAVINGS BANK,
not in its individual capacity but solely
as Indenture Trustee
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
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STATE OF ILLINOIS, )
) SS:
COUNTY OF COOK )
On the __ day of [ ], 1998, before me, [ ],a Notary Public in and
for said county and state, personally appeared [ ], personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person and officer
whose name is subscribed to the within instrument and acknowledged to me that
such person executed the same in such person's authorized capacity, and that by
the signature on the instrument Harris Trust and Savings Bank, a banking
corporation organized under the laws of the State of Illinois, and the entity
upon whose behalf the person acted, executed this instrument.
WITNESS my hand and official seal.
-----------------------------------
Notary Public
My commission expires:
<PAGE>
STATE OF ILLINOIS, )
) SS:
COUNTY OF COOK )
On the ____ day of [ ], 1998, before me, [ ],a Notary Public in and
for said county and state, personally appeared [ ], personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person and officer
whose name is subscribed to the within instrument and acknowledged to me that he
executed the same in his authorized capacity, and that by his signature on the
instrument Illinois Power Special Purpose Trust, a Delaware business trust and
the entity upon whose behalf the person acted, executed this instrument.
WITNESS my hand and official seal.
-----------------------------------
Notary Public
My commission expires:
<PAGE>
EXHIBIT A
REGISTERED $__________
NO. _________
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO._______
THE PRINCIPAL OF THIS SERIES [ ], CLASS [ - ] ("THIS CLASS [ - ]
NOTE") WILL BE PAID IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING PRINCIPAL AMOUNT OF THIS CLASS [ - ] NOTE AT ANY TIME MAY BE LESS
THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THE HOLDER OF THIS NOTE HAS NO
RECOURSE TO THE ISSUER HEREOF AND AGREES TO LOOK ONLY TO THE NOTE COLLATERAL, AS
DESCRIBED IN THE INDENTURE AND ANY RELATED Trust Issuance Certificate OR SERIES
SUPPLEMENT REFERRED TO ON THE REVERSE HEREOF, FOR PAYMENT OF ANY AMOUNTS DUE
HEREUNDER. ALL OBLIGATIONS OF THE ISSUER OF THIS CLASS [ - ] NOTE UNDER THE
TERMS OF THE INDENTURE WILL BE RELEASED AND DISCHARGED UPON PAYMENT IN FULL
HEREOF OR AS OTHERWISE PROVIDED IN SECTION 3.10(B) OR ARTICLE IV OF THE
INDENTURE. THE HOLDER OF THIS CLASS [ - ] NOTE HEREBY COVENANTS AND AGREES THAT
PRIOR TO THE DATE WHICH IS ONE (1) YEAR AND ONE (1) DAY AFTER THE PAYMENT IN
FULL OF THE SERIES [ ] CLASS [ - ] NOTES, IT WILL NOT INSTITUTE AGAINST, OR
JOIN ANY OTHER PERSON IN INSTITUTING AGAINST, THE ISSUER 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. NOTHING IN THIS PARAGRAPH SHALL PRECLUDE, OR BE DEEMED TO ESTOP,
SUCH HOLDER (A) FROM TAKING OR OMITTING TO TAKE ANY ACTION PRIOR TO SUCH DATE IN
(I) ANY CASE OR PROCEEDING VOLUNTARILY FILED OR COMMENCED BY OR ON BEHALF OF THE
ISSUER UNDER OR PURSUANT TO ANY SUCH LAW OR (II) ANY INVOLUNTARY CASE OR
PROCEEDING PERTAINING TO THE ISSUER WHICH IS FILED OR COMMENCED BY OR ON BEHALF
OF A PERSON OTHER THAN SUCH HOLDER AND IS NOT JOINED IN BY SUCH HOLDER (OR ANY
PERSON TO WHICH SUCH HOLDER SHALL HAVE ASSIGNED, TRANSFERRED OR OTHERWISE
CONVEYED ANY PART OF THE OBLIGATIONS OF THE ISSUER HEREUNDER) UNDER OR PURSUANT
TO ANY SUCH LAW, OR (B) FROM COMMENCING OR PROSECUTING ANY LEGAL ACTION WHICH IS
NOT AN INVOLUNTARY CASE OR PROCEEDING UNDER OR PURSUANT TO ANY SUCH LAW AGAINST
THE ISSUER OR ANY OF ITS PROPERTIES. TRANSFERS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO
A-1
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TRANSFERS IN THE CLEARING AGENCY OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
THE INDENTURE.
ILLINOIS POWER SPECIAL PURPOSE TRUST
NOTES, SERIES [ ], CLASS [ - ].
<TABLE>
<CAPTION>
INTEREST ORIGINAL PRINCIPAL FINAL MATURITY
RATE AMOUNT DATE
-------- ------------------ --------------
<S> <C> <C>
</TABLE>
Illinois Power Special Purchase Trust, a business trust organized
and existing under the laws of the State of Delaware (herein referred to as
the "Note Issuer"), for value received, hereby promises to pay to Cede & Co.,
or registered assigns, the Original Principal Amount shown above
[in quarterly installments] on the Payment Dates and in the amounts specified
on the reverse hereof or, if less, the amounts determined pursuant to Section
8.02 of the Indenture, in each year, commencing on the date determined as
provided on the reverse hereof and ending on or before the Final Maturity
Date shown above and to pay interest, at the Interest Rate shown above, on
each [March 15, June 15, September 15 and December 15] or if any such day is
not a Business Day, the next succeeding Business Day, commencing on [ ]and
continuing until the earlier of the payment in full of the principal hereof
and the Final Maturity Date (each a "Payment Date"), on the principal amount
of this Series [ ], Class [ - ] Note (hereinafter referred to as "this
Class [ - ] Note"). Interest on this Class [ - ] Note will accrue for each
Payment Date from the most recent Payment Date on which interest has been
paid to but excluding such Payment Date or, if no interest has yet been paid,
from [ ]. Interest will be computed on the basis of [specify method of
computation]. Such principal of and interest on this Class [ - ] Note
shall be paid in the manner specified on the reverse hereof
The principal of and interest on this Class [ - ] Note are payable
in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts. All payments
made by the Note Issuer with respect to this Class [ - ] Note shall be
applied first to interest due and payable on this Class [ - ] Note as
provided above and then to the unpaid principal of and premium, if any, on
this Class [ - ] Note, all in the manner set forth in Section 8.02 of the
Indenture.
A-2
<PAGE>
Reference is made to the further provisions of this Class [ - ] Note
set forth on the reverse hereof; which shall have the same effect as though
fully set forth on the face of this Class [ - ] Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Class
[ - ] Note shall not be entitled to any benefit under the Indenture referred to
on the reverse hereof; or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Note Issuer has caused this instrument to be
signed, manually or in facsimile, by its Responsible Officer.
Date: ILLINOIS POWER SPECIAL PURPOSE TRUST
By: FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION, not in its
individual capacity but solely as
Delaware Trustee
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
A-3
<PAGE>
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Dated:_______________ , ____
This is one of the Series [ ], Class [ - ] Notes, designated above
and referred to in the within-mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK,
not in its individual capacity but solely
as Indenture Trustee
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
A-4
<PAGE>
[REVERSE OF NOTE](1)
This Series 199[ ]- [ ], Class [ - ] Note is one of a duly
authorized issue of Notes of the Note Issuer (herein called the "Notes"),
issued and to be issued in one or more Series, which Series are issuable in
one or more Classes, and the Series [ ] Notes consists of [ ] Classes,
including this Class [ - ]Note (herein called the "Class [ - ] Notes"), all
issued and to be issued under an Indenture dated as of [ ], 1998, (the
"Indenture"), between the Note Issuer and Harris Trust and Savings Bank, as
Indenture Trustee (the "Indenture Trustee", which term includes any successor
trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Note Issuer, the
Indenture Trustee and the Holders of the Notes. All terms used in this Class
[ - ] Note that are defined in the Indenture, as supplemented or amended,
shall have the meanings assigned to them in the Indenture.
The Class [ - ] Notes, the other Classes of Series [ ] Notes (all
of such Classes being referred to herein as "Series [ ] Notes") and any
other Series of Notes issued by the Note Issuer are and will be equally and
ratably secured by the Note Collateral pledged as security therefor as
provided in the Indenture.
The principal of this Class [ ] Note shall be payable on each
Payment Date only to the extent that amounts in the Collection Account are
available therefor, and only until the outstanding principal balance thereof
on the preceding Payment Date (after giving effect to all payments of
principal, if any, made on the preceding Payment Date) has been reduced to
the principal balance specified in the Expected Amortization Schedule which
is attached to the related Trust Issuance Certificate or Series Supplement,
if any, as Schedule A, unless payable earlier either because (x) an Event of
Default shall have occurred and be continuing and the Indenture Trustee or
the Holders of Notes representing not less than a majority of the Outstanding
Amount of the Notes of all Series have declared the Notes of all Series to be
immediately due and payable in accordance with Section 5.02 of the Indenture
or (y) the Note Issuer, at its option, shall have called for the redemption
of the Series [ ] Notes pursuant to Section 10.01 of the Indenture. However,
actual principal payments may be made in lesser than expected amounts and at
later than expected times as determined pursuant to Section 8.02 of the
Indenture. The entire unpaid principal amount of this Class [ - ] Note shall
be due and payable on the earlier of the Final Maturity Date hereof and the
Optional Redemption Date, if any. Notwithstanding the foregoing, the entire
unpaid principal amount of the Notes shall be due and payable, if not then
previously paid, on the date on which an Event of Default shall have occurred
and be continuing and the Indenture Trustee or the Holders of the Notes
representing not less than a majority of the Outstanding Amount of the Notes
of all Series have declared the Notes of all Series to be immediately due and
payable in the manner provided in Section 5.02 of the Indenture. All
- -----------------------
(1) The form of the reverse of a Note is substantially as follows, unless
otherwise specified in the related Trust Issuance Certificate or Series
Supplement.
A-5
<PAGE>
principal payments on the Class [ - ] Notes shall be made pro rata to the Class
[ - ] Holders entitled thereto based on the respective principal amounts of the
Class [ - ] Notes held by them.
Payments of interest on this Class [ - ] Note due and payable on each
Payment Date, together with the installment of principal or premium, if any,
shall be made by check mailed first-class, postage prepaid, to the Person whose
name appears as the Registered Holder of this Class [ - ] Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on the
Record Date or in such other manner as may be provided in the related Trust
Issuance Certificate or Series Supplement, if any, except for the final
installment of principal and premium, if any, payable with respect to this Class
[ - ] Note on a Payment Date which shall be payable as provided below. Such
checks shall be mailed to the Person entitled thereto at the address of such
Person as it appears on the Note Register as of the applicable Record Date
without requiring that this Class [ - ] Note be submitted for notation of
payment. Any reduction in the principal amount of this Class [ - ] Note (or any
one or more Predecessor Notes) effected by any payments made on any Payment Date
shall be binding upon all future Holders of this Class [ - ] Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof; whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Class [ - ] Note on a Payment Date,
then the Indenture Trustee, in the name of and on behalf of the Note Issuer,
will notify the Person who was the Registered Holder hereof as of the Record
Date preceding such Payment Date by notice mailed no later than five days prior
to such final Payment Date and shall specify that such final installment will be
payable only upon presentation and surrender of this Class [ - ] Note and shall
specify the place where this Class [ - ] Note may be presented and surrendered
for payment of such installment.
The Note Issuer shall pay interest on overdue installments of interest
at the Note Interest Rate to the extent lawful.
As provided in the Indenture, the Class [ - ] Notes may be redeemed,
in whole but not in part, at the option of the Note Issuer on any Payment Date
at the Optional Redemption Price if; after giving effect to payments that would
otherwise be made on such Payment Date, the Outstanding Amount of the Class
[ - ] Notes has been reduced to less than five percent of the initial principal
balance thereof.
This Note is a transitional funding instrument as such term is defined
in the Funding Law. Principal and interest due and payable on this Note are
payable from and secured primarily by intangible transition property created and
established by a transitional funding order obtained from the Illinois Commerce
Commission pursuant to the Funding Law. Intangible transition property consists
of the right to impose and collect certain charges (defined in the Funding Law
as "instrument funding charges") to be included in regular electric utility
bills of existing and future electric service customers of Commonwealth Edison
Company, an Illinois electric utility.
A-6
<PAGE>
The Funding Law provides that: "The State [of Illinois] pledges to
and agrees with the holders of any transitional funding instruments who may
enter into contracts with an electric utility, grantee, assignee or issuer
pursuant to this Article XVIII [of the Public Utility Act] that the State
[of Illinois] will not in any way limit, alter, impair or reduce the value of
intangible transition property created by, or instrument funding charges
approved by, a transitional funding order so as to impair the terms of any
contract made by such electric utility, grantee, assignee or issuer with such
holders or in any way impair the rights and remedies of such holders until
the pertinent grantee instruments or, if the related transitional funding
order does not provide for the issuance of grantee instruments, the pertinent
transitional funding instruments and interest, premium and other fees, costs
and charges related thereto, as the case may be, are fully paid and
discharged. Electric utilities, grantees and issuers are authorized to
include these pledges and agreements of the State [of Illinois] in any
contract with the holders of transitional funding instruments or with any
assignees pursuant to this Article XVIII [of the Public Utility Act]and any
assignees are similarly authorized to include these pledges and agreements of
the State [of Illinois] in any contract with any issuer, holder or any other
assignee. Nothing in this Article XVIII [of the Public Utility Act]shall
preclude the State of Illinois from requiring adjustments as may otherwise be
allowed by law to the electric utility's base rates, transition charges,
delivery services charges, or other charges for tariffed services, so long as
any such adjustment does not directly affect or impair any instrument funding
charges previously authorized by a transitional funding order issued by the
[Illinois Commerce Commission]."
As a result of the foregoing pledge, the State of Illinois may not,
except as provided in the succeeding sentence, in any way limit, alter,
impair or reduce the value of such intangible transition property or such
instrument funding changes in a manner substantially impairing the Note
Indenture or the rights and remedies of the Holders, until the Notes,
together with interest thereon, are fully paid and discharged.
Notwithstanding the immediately preceding sentence, the State of Illinois
would be allowed to effect a temporary impairment of the Holders' rights if
it could be shown that such impairment was necessary to advance a significant
and legitimate public purpose.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Class [- ] Note may be registered on the
Note Register upon surrender of this Class [ - ] Note for registration of
transfer at the office or agency designated by the Note Issuer pursuant to
the Indenture, duly endorsed by, or accompanied by (a) a written instrument
of transfer in form satisfactory to the Indenture Trustee duly executed by
the Holder hereof or his attorney duly authorized in writing, with such
signature guaranteed by an institution which is a member of one of the
following recognized Signature Guaranty Programs: (i) The Securities Transfer
Agent Medallion Program (STAMP); (ii)The New York Stock Exchange Medallion
Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) in
such other guarantee program acceptable to the Indenture Trustee, and (b)
such other documents as the Indenture Trustee may require, and thereupon one
or more new Class [ - ] Notes of Minimum Denominations and in the same
aggregate principal amount will be issued to the designated transferee or
transferees. No service charge will be charged for any registration of
transfer or exchange of this Class [ - ] Note,
A-7
<PAGE>
but the transferor may be required to pay a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection with any such
registration of transfer or exchange, other than exchanges pursuant to
Section 2.04 or 9.06 of the Indenture not involving any transfer.
Each Note holder, by acceptance of a Note, covenants and agrees that
no recourse may be taken, directly or indirectly, with respect to the
obligations of the Note Issuer or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Delaware Trustee in its
respective individual capacity, (ii) any owner of a beneficial interest in the
Note Issuer (including the Grantee and Illinois Power) or (iii) any partner,
owner, beneficiary, agent, officer or employee of the Indenture Trustee or the
Delaware Trustee in its respective capacity, any holder of a beneficial interest
in the Delaware Trustee or the Indenture Trustee or of any successor or assign
of the Indenture Trustee or the Delaware Trustee in any of their individual or
corporate capacities except as any such Person may have expressly agreed (it
being understood that none of the Indenture Trustee, the Delaware Trustee, the
Grantee and Illinois Power has any such obligations in their respective
individual or corporate capacities).
Prior to the due presentment for registration of transfer of this
Class [ - ] Note Issuer, the Indenture Trustee and any agent of the Note Issuer
or the Indenture Trustee may treat the Person in whose name this Class [ - ]
Note is registered (as of the day of determination) as the owner hereof for the
purpose of receiving payments of principal of and premium, if any, and interest
on this Class [ - ] Note and for all other purposes whatsoever, whether or not
this Class [ - ] Note be overdue, and neither the Note Issuer, the Indenture
Trustee nor any such agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of
the Note Issuer and the rights of the Holders of the Notes under the
Indenture at any time by the Note Issuer with the consent of the Holders of
Notes representing a majority of the Outstanding Amount of all Notes at the
time outstanding of each Series or Class to be affected. The Indenture also
contains provisions permitting the Holders of Notes representing specified
percentages of the Outstanding Amount of the Notes of all Series, on behalf
of the Holders of all the Notes, to waive compliance by the Note Issuer with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Class [ - ] Note (or any one of more Predecessor Notes) shall be
conclusive and binding upon such Holder and upon all future Holders of this
Class [ - ] Note and of any Note issued upon the registration of transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of
such consent or waiver is made upon this Class [ - ] Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Note Issuer" as used in this Class [ - ] Note includes any
successor to the Note Issuer under the Indenture.
A-8
<PAGE>
The Note Issuer is permitted by the Indenture, under certain
circumstances, to merge or consolidate, subject to the rights of the Indenture
Trustee and the Holders of Notes under the Indenture.
The Class [ - ] Notes are issuable only in registered form in
denominations as provided in the Indenture and the related Trust Issuance
Certificate or Series Supplement, if any, subject to certain limitations therein
set forth.
This Class [ - ] Note, the Indenture and the related Trust Issuance
Certificate or Series Supplement, if any, shall be construed in accordance with
the laws of the State of Illinois, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Class
[ - ] Note or of the Indenture shall alter or impair the obligation of the Note
Issuer, which is absolute and unconditional, to pay the principal of and
interest on this Class [ - ] Note at the times, place, and rate, and in the coin
or currency-herein prescribed.
The Holder of this Class [ - ] Note by the acceptance hereof agrees
that, notwithstanding any provision of the Indenture or the related Trust
Issuance Certificate or Series Supplement, if any, to the contrary, the Holder
shall have no recourse against the Note Issuer, but shall look only to the Note
Collateral, with respect to any amounts due to the Holder under this Class [ - ]
Note.
The Note Issuer and the Indenture Trustee, by entering into this
Indenture, and the Holders and any Persons holding a beneficial interest in any
Class [ - ] Note, by acquiring any Class [ - ] Note or interest therein, (i)
express their intention that the Class [ - ] Notes qualify under applicable tax
law as indebtedness of Illinois Power secured by the Note Collateral and (ii)
unless otherwise required by appropriate taxing authorities, agree to treat the
Class [ - ] Notes as indebtedness of Illinois Power secured by the Note
Collateral for the purpose of federal income, state and local income and
franchise taxes, and any other taxes imposed upon, measured by or based upon
gross or net income.
A-9
<PAGE>
ASSIGNMENT(2)
Social Security or taxpayer I.D. or other identifying number of assignee
________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto __________________________________________________________
(name and address of assignee)
the within Class [ - ] Note and all rights thereunder, and hereby irrevocably
constitutes and appoints______________, attorney, to transfer said Class [ - ]
Note on the books kept for registration thereof; with full power of
substitution in the premises.
Dated:
----------------------------- ------------------------------------
Signature Guaranteed:
----------------------------- ------------------------------------
- -------------------------
(2) NOTE: The signature to this assignment must correspond with the
name of the registered owner as it appears on the face of the within Class
[ - ] Note in every particular, without alteration, enlargement or any change
whatsoever.
A-10
<PAGE>
EXHIBIT B
Trust Issuance Certificate dated as of __________, ____ (this
"Certificate"), executed and delivered by Illinois Power Special
Purpose Trust, a business trust created under the laws of the State of
Delaware (the "Note Issuer"), to Harris Trust and Savings Bank, a
banking corporation organized under the laws of the State of Illinois
(the "Indenture Trustee"), as Indenture Trustee under the Indenture
dated as of December 1, 1998, between the Note Issuer and the
Indenture Trustee (the "Indenture").
PRELIMINARY STATEMENT
Article II of the Indenture provides, among other things, that the
Note Issuer may at any time and from time to time execute and deliver to the
Indenture Trustee one or more Trust Issuance Certificates for the purposes of
authorizing the issuance by the Note Issuer of a Series of Notes and specifying
the terms thereof. The Note Issuer has duly authorized the creation of a Series
of Notes with an initial aggregate principal amount of $ [___________] to be
known as Illinois Power Transitional Funding Notes, Series [ ] (the "Series
[ ] Notes"), and the Note Issuer is executing and delivering this Certificate
in order to provide for the Series [ ] Notes.
All terms used in this Certificate that are defined in the Indenture,
either directly or by reference therein, have the meanings assigned to them
therein, except to the extent such terms are defined or modified in this
Certificate or the context clearly requires otherwise. In the event that any
term or provision contained herein shall conflict with or be inconsistent with
any term or provision contained in the Indenture, the terms and provisions of
this Certificate shall govern.
SECTION 1. DESIGNATION. The Series [ ] Notes shall be designated
generally as Illinois Power Transitional Funding Notes, Series [ ] and further
denominated as Classes [ ] through [ ].
SECTION 2. INITIAL PRINCIPAL AMOUNT; NOTE INTEREST RATE: SCHEDULED
MATURITY DATE; FINAL MATURITY DATE. The Notes of each Class of the Series [ ]
shall have the initial principal amount, bear interest at the rates per annum
and shall have Scheduled Maturity Dates and Final Maturity Dates set forth
below:
<TABLE>
<CAPTION>
INITIAL NOTE
PRINCIPAL INTEREST SCHEDULED FINAL
CLASS AMOUNT RATE MATURITY DATE DATE MATURITY
----- --------- --------- ------------- --------- --------
<S> <C> <C> <C> <C> <C>
</TABLE>
B-1
<PAGE>
The Note Interest Rate shall be computed on the basis of a 360-day year of
twelve 30-day months. [IF THE NOTES OF ALL OR ANY CLASSES ARE TO BE FLOATING
RATE NOTES, DESCRIBE HERE THE INDEX OR INDEXES TO BE USED TO DETERMINE THE
APPLICABLE VARIABLE INTEREST RATE.]
SECTION 3. AUTHENTICATION DATE; PAYMENT DATES; EXPECTED
AMORTIZATION SCHEDULE FOR PRINCIPAL: QUARTERLY INTEREST; REQUIRED
OVERCOLLATERALIZATION LEVEL; NO PREMIUM; OTHER TERMS.
(a) AUTHENTICATION DATE. The Series [ ] Notes that are
authenticated and delivered by the Indenture Trustee to or upon the order of the
Note Issuer on [ ] (the "Series Issuance Date") shall have as their date of
authentication [____________].
(b) PAYMENT DATES. The Payment Dates for the Series [ ] Notes are
March 25, June 25, September 25 and December 25 of each year or, if any such
date is not a Business Day, the next succeeding Business Day, commencing on [ ]
and continuing until the earlier of repayment of the Series [ ] Notes in full
and the Final Maturity Date for the Series [ ] Notes.
(c) EXPECTED AMORTIZATION SCHEDULE FOR PRINCIPAL. Unless an Event of
Default shall have occurred and be continuing on each Payment Date, the
Indenture Trustee shall distribute to the Holders of record as of the related
Record Date amounts payable pursuant to Section 8.02(d)(vii) of the Indenture as
principal, in the following order and priority: [(1) to the holders of the Class
A-1 Notes, until the Outstanding Amount of such Class of Notes thereof has been
reduced to zero; (2) to the holders of the Class A-2 Notes, until the
Outstanding Amount of such Class of Notes thereof has been reduced to zero; (3)
to the holders of the Class A-3 Notes, until the Outstanding Amount of such
Class of Notes thereof has been reduced to zero; (4) to the holders of the Class
A-4 Notes, until the Outstanding Amount of such Class of Notes thereof has been
reduced to zero; (5) to the holders of the Class A-S Notes until the Outstanding
Amount of such Class of Notes thereof has been reduced to zero; (6) to the
holders of the Class A-6 Notes, until the Outstanding Amount of such Class of
Notes thereof has been reduced to zero; (7) to the holders of the Class A-7
Notes until the Outstanding Amount of such Class of Notes thereof has been
reduced to zero; and (8) to the holders of the Class A-8 Notes, until the
Outstanding Amount of such Class of Notes thereof has been reduced to zero;]
PROVIDED, HOWEVER, that in no event shall a principal payment pursuant to this
Section 3(c) on any Class on a Payment Date be greater than the amount necessary
to reduce the Outstanding Amount of such Class of Notes below the amount
specified in the Expected Amortization Schedule which is attached as Schedule A
hereto for such Class and Payment Date.
(d) QUARTERLY INTEREST. Quarterly Interest will be payable on each
Class of the Series [ ]Notes on each Payment Date in an equal amount to
[one-fourth] of the product of (i) the applicable Note Interest Rate and (ii)
the Outstanding Amount of the related Class of Notes as of the close of
business on the preceding Payment Date after giving effect to all payments of
B-2
<PAGE>
principal made to the holders of the related Class of Series [ ] Notes on
such preceding Payment Date; PROVIDED, HOWEVER, that with respect to the
initial Payment Date, or, if no payment has yet been made, interest on the
outstanding principal balance will accrue from and including the Series
Issuance Date to, but excluding, the following Payment Date.
(e) REQUIRED OVERCOLLATERALIZATION LEVEL. The Required
Overcollateralization Level for any Payment Date shall be as set forth in
Schedule B hereto.
[(f) NO PREMIUM, NO PREMIUM WILL BE PAYABLE IN CONNECTION WITH ANY
OPTIONAL REDEMPTION OF THE SERIES [ ] NOTES.]
[(g) THE SERIES [ ] NOTES SHALL NOT BE BOOK-ENTRY NOTES AND THE
APPLICABLE PROVISIONS OF SECTION 2.11 OF THE INDENTURE SHALL NOT APPLY TO SUCH
NOTES.]
SECTION 4. MINIMUM DENOMINATIONS. The Series 199 [ ] - [ ] Notes
shall be issuable in the Minimum Denomination and integral multiples thereof.
SECTION 5. CERTAIN DEFINED TERMS. Article One of the Indenture
provides that the meanings of certain defined terms used in the Indenture shall,
when applied to the Notes of a particular Series, be as defined in Appendix A to
the Indenture. Additionally, Article Two of the Indenture provides that with
respect to a particular Series of Notes, certain terms will have the meanings
specified in the related Certificate. With respect to the Series [ ] Notes, the
following definitions shall apply:
"MINIMUM DENOMINATION" shall mean $1,000.
"NOTE INTEREST RATE" has the meaning set forth in Section 2 of this
Certificate.
"PAYMENT DATE" has the meaning set forth in Section 3(b) of this
Certificate.
"QUARTERLY INTEREST" has the meaning set forth in Section 3(d) of this
Certificate.
"SERIES ISSUANCE DATE" has the meaning set forth in Section 3(a) of
this Certificate.
SECTION 6. DELIVERY AND PAYMENT FOR THE SERIES [ ] NOTES; FORM OF
THE SERIES [ ] NOTES. The Indenture Trustee shall deliver the Series [ ]
Notes to or upon order of the Note Issuer when authenticated in accordance with
Section 2.03 of the Indenture. The Series [ ] Notes of each Class shall be in
the form of Exhibits [A-1 through A-__] hereto.
SECTION 7. RATIFICATION OF AGREEMENT. As supplemented by this
Certificate, the Indenture is in all respects ratified and confirmed and the
Indenture, as so supplemented by this Certificate, shall be read, taken, and
construed as one and the same instrument.
B-3
<PAGE>
SECTION 8. COUNTERPARTS. This Certificate may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all of such counterparts shall together constitute but one and the
same instrument.
SECTION 9. GOVERNING LAW. This Certificate shall be construed in
accordance with the laws of the State of Illinois, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 10. TRUST OBLIGATION. No recourse may be taken directly or
indirectly, with respect to the obligations of the Note Issuer or the Indenture
Trustee on the Notes or under this Certificate or any certificate or other
writing delivered in connection herewith or therewith, against (i) the Indenture
Trustee or the Delaware Trustee in its individual capacity, (ii) any owner of a
beneficial interest in the Note Issuer (including the Grantee or Illinois Power)
or (iii) any partner, owner, beneficiary, agent, officer, director, employee or
agent of the Indenture Trustee or the Delaware Trustee in its individual
capacity, any holder of a beneficial interest in the Note Issuer or the
Indenture Trustee or of any successor or assign of any of them in their
respective individual or corporate capacities, except as any such Person may
have expressly agreed (it being understood that the Indenture Trustee, the
Delaware Trustee, the Grantee and Illinois Power have any such obligations in
their respective individual or corporate capacities).
IN WITNESS WHEREOF, the Note Issuer has caused this Certificate to be
duly executed by a Responsible Officer thereunto duly authorized as of the first
day of the month and year first above written.
ILLINOIS POWER SPECIAL PURPOSE
TRUST, as Note Issuer,
By: FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION, not in its
individual capacity but solely as Delaware
Trustee
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
B-4
<PAGE>
RECEIVED, this ___ day of ____________.
HARRIS TRUST AND SAVINGS BANK,
not in its individual capacity but solely as
Indenture Trustee
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
B-5
<PAGE>
SCHEDULE A
EXPECTED AMORTIZATION SCHEDULE
OUTSTANDING PRINCIPAL BALANCE
<TABLE>
<CAPTION>
DATE CLASS CLASS CLASS CLASS CLASS
- ---- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Series Issuance $ $ $ $ $
DATE
- ----
, 199
, 199
, 199
, 199
[Etc.]
</TABLE>
<PAGE>
SCHEDULE B
REQUIRED OVERCOLLATERALIZATION LEVEL SCHEDULE
<TABLE>
<CAPTION>
REQUIRED
PAYMENT DATE OVERCOLLATERALIZATION LEVEL
------------ ---------------------------
<S> <C>
_____________, 199 $
_____________, 199 $
_____________, 199 $
[Etc.] $
</TABLE>
<PAGE>
EXHIBIT C
SERIES SUPPLEMENT dated as of __________, 199_ (this "Supplement"), by
and between ILLINOIS POWER SPECIAL PURPOSE TRUST, a business trust
created under the laws of the State of Delaware (the "Note Issuer"),
and, Harris Trust and Savings Bank, a banking corporation organized
under the laws of the State of Illinois (the "Indenture Trustee"), as
Indenture Trustee under the Indenture dated as of [_______________],
1998, between the Note Issuer and the Indenture Trustee (the
"Indenture").
PRELIMINARY STATEMENT
Section 9.01 of the Indenture provides, among other things, that
the Note Issuer and the Indenture Trustee may at any time and from time to
time enter into one or more indenture supplemental to the Indenture for the
purposes of authorizing the issuance by the Note Issuer of a Series of Notes
and specifying the terms thereof. The Note Issuer has duly authorized the
creation of a Series of Notes with an initial aggregate principal amount of
$ [___________] to be known as Illinois Power Transitional Funding Trust Notes,
Series [ ] (the "Series [ ] Notes"), and the Note Issuer and the Indenture
Trustee are executing an delivering this Supplement in order to provide for
the Series [ ] Notes.
All terms used in this Supplement that are defined in the
Indenture, either directly or by reference therein, have the meanings
assigned to them therein, except to the extent such terms are defined or
modified in this Supplement or the context clearly requires otherwise. In the
event that any term or provision contained in the Indenture, the terms and
provisions of this Supplement shall govern.
SECTION 1. DESIGNATION. The Series [ ] Notes shall be
designated generally as Illinois Power Transitional Funding Notes, Series [ ]
and further denominated as Classes [ ] through [ ].
SECTION 2. INITIAL PRINCIPAL AMOUNT; NOTE INTEREST RATE:
SCHEDULED MATURITY DATE; FINAL MATURITY DATE. The Notes of each Class of the
Series [ ] shall have the initial principal amount, bear interest at the rates
per annum and shall have Scheduled Maturity Dates and Final Maturity Dates
set forth below:
<TABLE>
<CAPTION>
INITIAL NOTE FINAL
PRINCIPAL INTEREST SCHEDULED MATURITY
CLASS AMOUNT RATE MATURITY DATE DATE
----- --------- -------- --------- ---- --------
<S> <C> <C> <C> <C> <C>
</TABLE>
C-1
<PAGE>
The Note Interest Rate shall be computed on the basis of a 360-day year of
twelve 30-day months. [IF THE NOTES OF ALL OR ANY CLASSES ARE TO BE FLOATING
RATE NOTES, DESCRIBE HERE THE INDEX OR INDEXES TO BE USED TO DETERMINE THE
APPLICABLE VARIABLE INTEREST RATE.]
SECTION 3. AUTHENTICATION DATE; PAYMENT DATES; EXPECTED
AMORTIZATION SCHEDULE FOR PRINCIPAL: QUARTERLY INTEREST; REQUIRED
OVERCOLLATERALIZATION LEVEL; NO PREMIUM.
(a) AUTHENTICATION DATE. The Series [ ] Notes that are
authenticated and delivered by the Indenture Trustee to or upon the order of
the Note Issuer on [ ] (the "Series Issuance Date") shall have as their date
of authentication [____________].
(b) PAYMENT DATES. The Payment Dates for the Series [ ] Notes are
[March 15, June 15, September 15 and December 15] of each year or, if any
such date is not a Business Day, the next succeeding Business Day, commencing
on [ ] and continuing until the earlier of repayment of the Series [ ] Notes
in full and the Final Maturity Date for the Series [ ] Notes.
(c) EXPECTED AMORTIZATION SCHEDULE FOR PRINCIPAL. Unless an Event of
Default shall have occurred and be continuing on each Payment Date, the
Indenture Trustee shall distribute to the Holders of record as of the related
Record Date amounts payable pursuant to Section 8.02(d)(vii) of the Indenture as
principal, in the following order and priority: [(1) to the holders of the Class
A-1 Notes, until the Outstanding Amount of such Class of Notes thereof has been
reduced to zero; (2) to the holders of the Class A-2 Notes, until the
Outstanding Amount of such Class of Notes thereof has been reduced to zero; (3)
to the holders of the Class A-3 Notes, until the Outstanding Amount of such
Class of Notes thereof has been reduced to zero; (4) to the holders of the Class
A-4 Notes, until the Outstanding Amount of such Class of Notes thereof has been
reduced to zero; (5) to the holders of the Class A-5 Notes until the Outstanding
Amount of such Class of Notes thereof has been reduced to zero; (6) to the
holders of the Class A-6 Notes, until the Outstanding Amount of such Class of
Notes thereof has been reduced to zero; (7) to the holders of the Class A-7
Notes until the Outstanding Amount of such Class of Notes thereof has been
reduced to zero; and (8) to the holders of the Class A-8 Notes, until the
Outstanding Amount of such Class of Notes thereof has been reduced to zero;]
PROVIDED, HOWEVER, that in no event shall a principal payment pursuant to this
Section 3(c) on any Class on a Payment Date be greater than the amount necessary
to reduce the Outstanding Amount of such Class of Notes below the amount
specified in the Expected Amortization Schedule which is attached as Schedule A
hereto for such Class and Payment Date.
(d) QUARTERLY INTEREST. [Quarterly] Interest will be payable on each
Class of the Series [ ] Notes on each Payment Date in an equal amount to
[one-fourth] of the product of (i) the applicable Note Interest Rate and (ii)
the Outstanding Amount of the related Class of Notes as of the close of business
on the preceding Payment Date after giving effect to all payments of
C-2
<PAGE>
principal made to the holders of the related Class of Series [ ] Notes on
such preceding Payment Date; PROVIDED, HOWEVER, that with respect to the
initial Payment Date, or, if no payment has yet been made, interest on the
outstanding principal balance will accrue from and including the Series
Issuance Date to, but excluding, the following Payment Date.
(e) REQUIRED OVERCOLLATERALIZATION LEVEL. The Required
Overcollateralization Level for any Payment Date shall be as set forth in
Schedule B hereto.
[(f) NO PREMIUM, NO PREMIUM WILL BE PAYABLE IN CONNECTION WITH ANY
OPTIONAL REDEMPTION OF THE SERIES [ ] NOTES.]
[(g) THE SERIES [ ] NOTES SHALL NOT BE BOOK-ENTRY NOTES AND THE
APPLICABLE PROVISIONS OF SECTION 2.11 OF THE INDENTURE SHALL NOT APPLY TO SUCH
NOTES.]
SECTION 4. MINIMUM DENOMINATIONS. The Series 199[ ] - [ ] Notes
shall be issuable in the Minimum Denomination and integral multiples thereof.
SECTION 5. CERTAIN DEFINED TERMS. Article One of the Indenture
provides that the meanings of certain defined terms used in the Indenture
shall, when applied to the Notes of a particular Series, be as defined in
Appendix A to the Indenture. Additionally, Article Two of the Indenture
provides that with respect to a particular Series of Notes, certain terms
will have the meanings specified in the related Supplement. With respect to
the Series [ ] Notes, the following definitions shall apply:
"MINIMUM DENOMINATION" shall mean $1,000.
"NOTE INTEREST RATE" has the meaning set forth in Section 2 of this
Supplement.
"PAYMENT DATE" has the meaning set forth in Section 3(b) of this
Supplement.
"QUARTERLY INTEREST" has the meaning set forth in Section 3(d) of
this Supplement.
"SERIES ISSUANCE DATE" has the meaning set forth in Section 3(a) of
this Supplement.
SECTION 6. DELIVERY AND PAYMENT FOR THE SERIES [ ] NOTES; FORM OF
THE SERIES [ ] NOTES. The Indenture Trustee shall deliver the Series [ ]
Notes to or upon order of the Note Issuer when authenticated in accordance with
Section 2.03 of the Indenture. The Series [ ] Notes of each Class shall be in
the form of Exhibits [A-1 through A-__] hereto.
SECTION 7. RATIFICATION OF AGREEMENT. As supplemented by this
Certificate, the Indenture is in all respects ratified and confirmed and the
Indenture, as so supplemented by this Supplement, shall be read, taken, and
construed as one and the same instrument.
C-3
<PAGE>
SECTION 8. COUNTERPARTS. This Certificate may be executed in
any number of counterparts, each of which so executed shall be deemed to be
an original, but all of such counterparts shall together constitute but one
and the same instrument.
SECTION 9. GOVERNING LAW. This Certificate shall be construed
in accordance with the laws of the State of Illinois, without reference to
its conflict of law provisions, and the obligations, rights and remedies of
the parties hereunder shall be determined in accordance with such laws.
SECTION 10. TRUST OBLIGATION. No recourse may be taken directly
or indirectly, with respect to the obligations of the Note Issuer or the
Indenture Trustee on the Notes or under this Certificate or any certificate
or other writing delivered in connection herewith or therewith, against (i)
the Indenture Trustee or the Delaware Trustee in its individual capacity,
(ii) any owner of a beneficial interest in the Note Issuer (including the
Grantee or Illinois Power) or (iii) any partner, owner, beneficiary, agent,
officer, director, employee or agent of the Indenture Trustee or the Delaware
Trustee in its individual capacity, any holder of a beneficial interest in
the Note Issuer or the Indenture Trustee or of any successor or assign of any
of them in their respective individual or corporate capacities, except as any
such Person may have expressly agreed (it being understood that the Indenture
Trustee, the Delaware Trustee, the Grantee and Illinois Power have any such
obligations in their respective individual or corporate capacities).
IN WITNESS WHEREOF, the Note Issuer and the Indenture Trustee have
caused this Supplement to be duly executed by their respective officers
thereunto duly authorized as of the first day of the month and year first
above written.
ILLINOIS POWER SPECIAL PURPOSE
TRUST, as Note Issuer
By: FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION, not in its
individual capacity but solely as Delaware
Trustee
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
HARRIS TRUST AND SAVINGS BANK, not in
its individual capacity but solely as Indenture
Trustee
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
C-4
<PAGE>
SCHEDULE A
EXPECTED AMORTIZATION SCHEDULE
OUTSTANDING PRINCIPAL BALANCE
<TABLE>
<CAPTION>
DATE CLASS CLASS CLASS CLASS CLASS
- ---- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Series Issuance $ $ $ $ $
DATE
- ----
, 199
, 199
, 199
, 199
[Etc.]
</TABLE>
<PAGE>
SCHEDULE B
REQUIRED OVERCOLLATERALIZATION LEVEL SCHEDULE
<TABLE>
<CAPTION>
REQUIRED
PAYMENT DATE OVERCOLLATERALIZATION LEVEL
------------ ---------------------------
<S> <C>
_____________, 199 $
_____________, 199 $
_____________, 199 $
[Etc.] $
</TABLE>
<PAGE>
EXHIBIT 4.3
FORM OF APPENDIX A TO INDENTURE
APPENDIX A
DEFINITIONS
This is APPENDIX A to the Indenture.
A. DEFINED TERMS. As used in the Grant Agreement, the Sale
Agreement, the Indenture, the Trust Agreement, the Servicing Agreement, Trust
Issuance Certificate, Series Supplement or any other Basic Document as
hereinafter defined, as the case may be (unless the context requires a different
meaning), the following terms have the following meanings:
"1998 FUNDING ORDER" means the Final Transitional Funding Order dated
September 10, 1998 issued by the ICC pursuant to the Funding Law, Docket No.
98-0488.
"1998 INITIAL TARIFF" means the initial Tariff filed with the ICC to
evidence the IFCs pursuant to the 1998 Funding Order.
"1998 TRANSITION PROPERTY" means all ITP created in favor of the
Grantee pursuant to the 1998 Funding Order.
"ACT" is defined in Section 11.03 of the Indenture.
"ACTUAL IFC COLLECTIONS" means, with respect to any Collection Period,
IFC Collections actually received by the Servicer with respect to such
Collection Period.
"ADJUSTMENT" means each Adjustment to the IFCs made pursuant to the
terms of any Funding Order in accordance with Section 4.01 (b)(i) of the
Servicing Agreement.
"ADJUSTMENT DATE" means January 1 and July 1 of each year, commencing
July 1, 1999.
"ADMINISTRATION AGREEMENT" means the Administration Agreement dated as
of December __, 1998, among Illinois Power and the Grantee as the same may be
amended, supplemented or otherwise modified from time to time.
"ADMINISTRATION FEE" means those amounts invoiced by Illinois Power to
Grantee for services and facilities provided by Illinois Power, as
Administrator, to Grantee in accordance with the Administration Agreement.
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<PAGE>
"ADMINISTRATOR" means Illinois Power and any successor in interest to
the extent permitted under the Administration Agreement.
"AFFILIATE" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect
to any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"AGENCY OFFICE" means the office of the Note Issuer maintained
pursuant to Section 3.02 of the Indenture.
"ALLOCABLE IFC REVENUE AMOUNTS" means, (i) with respect to any
lump-sum payments of transition charges under Section 16-108(h) of the Public
Utilities Act or (ii) with respect to any revenues derived from condemnation
proceedings, or FERC stranded cost recoveries or any other amounts which
reflect compensation for lost revenues which would otherwise have been
attributable to Applicable Rates, the allocable amounts of such transition
charges or other revenues which are deemed to be proceeds of the IFCs in
accordance with the terms of the Funding Order and which are to be set aside
for the benefit of the Note Issuer, in each case as calculated pursuant to
Section 6(f) of ANNEX I to the Servicing Agreement.
"AMENDATORY ACT" means Illinois Public Act 90-561, effective December
16, 1997, including without limitation, 220 ILCS 5/16-101 ET SEQ., 220 ILCS
5/17-101 ET SEQ. and 220 ILCS 5/18-101 ET SEQ., as amended from time to time.
"AMENDATORY TARIFF" means a tariff or notice filing filed with the ICC
in respect of an Adjustment substantially in the form of EXHIBIT C to the
Servicing Agreement.
"ANNUAL ACCOUNTANT'S REPORT" is defined in Section 3.04 of the
Servicing Agreement.
"APPLICABLE ARES" means, with respect to each Customer taking service
from an ARES, the ARES, if any, providing consolidated billing to that Customer
which includes billing of IFCs.
"APPLICABLE PERIOD" means the period commencing on an Adjustment Date
and ending on the day immediately preceding the next Adjustment Date.
"APPLICABLE RATES" means all of Illinois Power's tariffed charges
including, without limitation, charges for base rates, delivery services or
transition charges (including lump-sum payments for such charges) or other rates
for tariffed
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<PAGE>
services; PROVIDED, HOWEVER, that Applicable Rates shall not include late
charges or charges set forth in those tariffs which are filed specifically
and primarily to collect amounts related to decommissioning expense, taxes,
municipal infrastructure maintenance fees, franchise fees or other franchise
cost additions, costs imposed by local governmental units which are allocated
and charged to customers within the boundaries of such governmental units'
jurisdiction, renewable energy resources and coal technology development
assistance charges, energy assistance charges for the Supplemental Low-Income
Energy Assistance Fund, reimbursement for the costs of optional or
non-standard facilities and reimbursement for the costs of optional or
non-standard meters, or monies that will be paid to third parties (after
deduction of allowable administrative, servicing or similar fees), and
PROVIDED FURTHER that to the extent any rate reflects compensation for power
or energy supplied to customers by a person or entity other than the
Servicer, the IFC will be deducted and stated separately from such rate
without giving effect to such compensation.
"APPLICATION" means the Application for Transitional Funding Order and
Petition filed by Illinois Power with the ICC dated April 22, 1998 pursuant to
Section 18-103 of the Funding Law.
"ARES" means an alternative retail electric supplier as defined in
Section 16-102 of the Amendatory Act.
"ARES SERVICE AGREEMENT" means an agreement between an ARES and
Illinois Power for the provision of consolidated billing by such ARES to
customers in accordance with ICC Regulations, the terms of any Tariffs and
the terms of any delivery service tariffs filed by Illinois Power under
Section 16-118(b) of the Public Utilities Act.
"BANKRUPTCY CODE" means Title 11 of the United States Code (11 U.S.C.
Section 101 ET SEQ.), as amended from time to time.
"BASIC DOCUMENTS" means each Grant Agreement, each Sale Agreement, the
Indenture, the Trust Agreement, the Servicing Agreement, each Series Supplement,
each Trust Issuance Certificate, the Administration Agreement, each Letter of
Representations, the Note Depository Agreement, each Underwriting Agreement and
all other documents and certificates delivered in connection therewith.
"BENEFIT PLAN" means, with respect to any Person, any defined benefit
plan (as defined in Section 3(35) of ERISA) that (a) is or was at any time
during the past six years maintained by such Person or any ERISA Affiliate of
such person, or to which contributions by any such Person are or were at any
time during the past six years required to be made or under which such Person
has or could have any liability or (b) is subject to the provisions of Title IV
of ERISA.
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<PAGE>
"BILLING PERIOD" means the period created by dividing the calendar
year into twelve consecutive periods of approximately twenty-one (21) Servicer
Business Days each, and represents the period during which the Servicer
typically renders a bill for electric service to each of its customers.
"BILLS" means each of the regular monthly bills, summary bills,
opening bills and closing bills issued to Customers or ARES by Illinois Power on
its own behalf and in its capacity as Servicer.
"BOOK-ENTRY FORM" means, with respect to any Note or Series of Notes,
that such Note or Series is not certificated and the ownership and transfers
thereof shall be made through the book entries by a Clearing Agency as described
in Section 2.11 of the Indenture and the applicable Trust Issuance Certificate
or Series Supplement, if any, pursuant to which such Note or Series was issued.
"BOOK-ENTRY NOTES" means any Notes issued in Book-Entry Form;
PROVIDED, HOWEVER, that after the occurrence of a condition whereupon book-entry
registration and transfer are no longer permitted and Definitive Notes are to be
issued to the Holder of such Notes, such Notes shall no longer be "Book-Entry
Notes."
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
on which banking institutions or trust companies in Wilmington, Delaware,
Chicago, Illinois or New York, New York or the Depository Trust Company are
authorized or required by law, regulation or executive order to remain closed.
"BUSINESS TRUST ACT" means the Delaware Business Trust Act, 12 Del.
Code Section 3801 ET SEQ.
"CAPITAL CONTRIBUTION" means the amount of cash retained by the Note
Issuer from proceeds of issuance of the Notes, as specified in the Trust
Agreement.
"CAPITAL SUBACCOUNT" is defined in Section 8.02(a) of the Indenture.
"CERTIFICATE OF COMPLIANCE" means the certificate referred to in
Section 3.03 of the Servicing Agreement and substantially in the form of EXHIBIT
B attached to the Servicing Agreement.
"CERTIFICATE OF FORMATION" means the Certificate of Formation of the
Grantee filed as of September 10, 1998 pursuant to, and in accordance with, the
Delaware Limited Liability Company Act, 6 Del. Code Section 18-101 ET SEQ.
"CERTIFICATE OF TRUST" means the Certificate of Trust filed with the
Secretary of State of the State of Delaware pursuant to which the Trust was
established, substantially in the form of EXHIBIT A to the Trust Agreement.
4
<PAGE>
"CLAIM" means a "claim" as defined in Section 101(5) of the Bankruptcy
Code.
"CLASS" means, with respect to any Series of Notes, any one of the
classes of Notes of that Series.
"CLEARING AGENCY" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act, as amended.
"CLEARING AGENCY PARTICIPANT" means a securities broker, dealer, bank,
trust company, clearing corporation or other financial institution or other
Person for whom from time to time a Clearing Agency effects book entry transfers
and pledges of securities deposited with the Clearing Agency.
"CLOSING DATE" means December___, 1998.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and Treasury Regulations promulgated thereunder.
"COLLECTION ACCOUNT" means the account established and maintained by
the Indenture Trustee in accordance with Section 8.02(a) of the Indenture and
any subaccounts contained therein.
"COLLECTION PERIOD" means any period commencing on the first Servicer
Business Day of any Billing Period and ending on the last Servicer Business Day
of such Billing Period.
"CONSOLIDATED ARES BILLING" has the meaning set forth in ANNEX I to
the Servicing Agreement.
"CORPORATE TRUST OFFICE" means with respect to the Indenture Trustee
or the Delaware Trustee, the principal office at which at any particular time
the corporate trust business of the Indenture Trustee or the Delaware Trustee,
respectively, shall be administered, which offices at the Closing Date are
located, in the case of the Indenture Trustee, at 311 West Monroe Street,
Chicago, Illinois, 60606, 12th Floor, Attention: Indenture Trust Administration,
and in the case of the Delaware Trustee, at First Union Trust Company, National
Association, One Rodney Square, 920 King Street, St. Floor, Wilmington, Delaware
19801, Attention: Corporate Trust Administration or at such other address as the
Indenture Trustee or Delaware Trustee may designate from time to time by notice
to the Holders and the Note Issuer, or the principal corporate trust office of
any successor Indenture Trustee or Delaware Trustee (the addresses of which the
successor Indenture Trustee or Delaware Trustee will notify the Holders and the
Note Issuer).
5
<PAGE>
"COVENANT DEFEASANCE OPTION" is defined in Section 4.01(b) of the
Indenture.
"CUSTOMERS" means all existing and future retail customers or classes
of retail customers of Illinois Power or other persons or group of Persons
obligated from time to time to pay Illinois Power or any successor "Applicable
Rates," and all other Persons obligated to pay IFCs pursuant to the 1998 Funding
Order or any Subsequent Funding Order, as applicable, and, including, without
limitation, any Persons obligated (or who would but for the contract described
herein, be obligated) to pay Applicable Rates who enters into a contract with
Illinois Power which provides that such person will pay an amount each Billing
Period to the Grantee or its assigns (including the Note Issuer), or to Illinois
Power as Servicer, as applicable, equal to the amount of IFCs that would have
been billed if the services provided under such contract were subject to
Applicable Rates.
"DEBT SERVICE BILLING REQUIREMENT" means, for any Applicable Period,
the aggregate amount of IFCs calculated by the Servicer as necessary to be
billed during such period in order to collect the Required Debt Service on or
before the end of the Applicable Period.
"DEFAULT" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default as defined in Section 5.01 of the
Indenture.
"DEFINITIVE NOTES" means Notes issued in definitive form in accordance
with Section 2.13 of the Indenture.
"DELAWARE TRUSTEE" means the Person acting as Delaware Trustee under
the Trust Agreement.
"DTC" means the Depository Trust Company or any successor thereto.
"DUFF & PHELPS" means Duff & Phelps Credit Rating Co. or any successor
thereto.
"ELIGIBLE DEPOSIT ACCOUNT" means either (a) a segregated trust account
with an Eligible Institution or (b) a segregated trust account with the
corporate trust department of a depository institution organized under the laws
of the United States of America or any one of the states thereof or the District
of Columbia (or any domestic branch of a foreign bank), having corporate trust
powers and acting as trustee for funds deposited in such account, so long as any
of the securities of such depository institution shall have a credit rating from
each Rating Agency in one of its generic rating categories which signifies
investment grade.
6
<PAGE>
"ELIGIBLE INSTITUTION" means (a) the corporate trust department of
the Indenture Trustee; PROVIDED that an account with the Indenture Trustee
will only be an Eligible Deposit Account if it is a segregated trust account
or (b) a depository institution organized under the laws of the United States
of America or any State (or any domestic branch of a foreign bank), which (i)
has either (A) a long-term unsecured debt rating of AAA by Standard & Poor's
and A-2 by Moody's, and if rated by Fitch IBCA, AAA by Fitch IBCA and if
rated by Duff & Phelps, AAA by Duff & Phelps or (B) a certificate of deposit
rating of A-1+ by Standard & Poor's and P-1 by Moody's, and if rated by Fitch
IBCA, F1+ by Fitch IBCA and if rated by Duff & Phelps, D-1+ by Duff & Phelps,
or any other long-term, short-term or certificate of deposit rating
acceptable to the Rating Agencies and (ii) whose deposits are insured by the
FDIC. If so qualified under clause (b) above, the Indenture Trustee may be
considered an Eligible Institution for the purposes of clause (a) of this
definition.
"ELIGIBLE INVESTMENTS" mean instruments or investment property which
evidence:
(a) direct obligations of, and obligations fully and
unconditionally guaranteed as to timely payment by, the United
States of America;
(b) demand deposits, time deposits, certificates of deposit or
bankers' acceptances of depository institutions meeting the
requirements of clause (b) of the definition of Eligible
Institution;
(c) commercial paper (other than commercial paper of Illinois
Power or any of its Affiliates) having, at the time of the
investment or contractual commitment to invest therein, a rating
from each of the Rating Agencies from which a rating is available
in the highest investment category granted thereby;
(d) investments in money market funds having a rating from
each of the Rating Agencies from which a rating is available in
the highest investment category granted thereby (including funds
for which the Indenture Trustee or the Delaware Trustee or any of
their Affiliates is investment manager or advisor);
(e) repurchase obligations with respect to any security that
is a direct obligation of, or fully guaranteed by, the United
States of America or any agency or instrumentality thereof the
obligations of which are backed by the full faith and credit of
the United States of America, in either case entered into with
depository institutions or trust companies meeting the
requirements of clause (b) of the definition of Eligible
Institutions; and
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<PAGE>
(f) any other investment permitted by each of the Rating
Agencies;
in each case maturing not later than the Business Day immediately preceding the
next Payment Date. Notwithstanding the foregoing, (x) Eligible Investments in
the Collection Account may mature not later than the Business Day immediately
preceding the next Payment Date, and (y) subject to the conditions and
limitations set forth in Section 8.03 of the Indenture, funds in the Collection
Account may be invested in securities that will not mature prior to each Payment
Date; PROVIDED, HOWEVER, that any securities or investments which mature in 32
days or more shall not be an "Eligible Investment" unless the issuer thereof has
a long-term unsecured debt rating of at least A1 from Moody's and A+ from S&P.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EVENT OF DEFAULT" is defined in Section 5.01 of the Indenture.
"EXPECTED AMORTIZATION SCHEDULE" means SCHEDULE 4.01(a) to the
Servicing Agreement, as the same may be amended from time to time.
"EXPECTED FINAL PAYMENT DATE" means, with respect to any Series or
Class of Notes, the Expected Maturity Date thereof.
"EXPECTED MATURITY DATE" means, with respect to any Series or Class of
Notes, the Expected Maturity Date therefor, as specified in the related Trust
Issuance Certificate or Series Supplement, if any.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FDIC" means the Federal Deposit Insurance Corporation or any
successor thereto.
"FERC" means the Federal Energy Regulatory Commission or any successor
thereto.
"FINAL" means, with respect to any Funding Order, that such Funding
Order has become final and that the time for filing an appeal therefrom has
expired.
"FINAL MATURITY DATE" means, with respect to any Series or Class of
Notes, the Final Maturity Date therefor, as specified in the related Trust
Issuance Certificate or Series Supplement, if any.
"FITCH IBCA" means Fitch IBCA, Inc. or any successor thereto.
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<PAGE>
"FLOATING RATE NOTES" means any Series or Class of Notes that accrue
interest at a variable rate based on the index described in the related Trust
Issuance Certificate or Series Supplement, if any.
"FUNDING LAW" means the Electric Utility Transitional Funding Law of
1997, 220 ILCS 5/18-101 ET SEQ.
"FUNDING ORDER" means, as the context may require, (i) the 1998
Funding Order and/or (ii) any Subsequent Funding Order.
"GENERAL SUBACCOUNT" is defined in Section 8.02(a) of the Indenture.
"GLOBAL NOTE" means a Note evidencing all or any part of a Series of
Notes to be issued to the Holders thereof in Book-Entry Form, which Global Note
shall be issued to the Clearing Agency, or its nominee, for such Series, in
accordance with Section 2.11 of the Indenture and the applicable Trust Issuance
Certificate or Series Supplement, if any, pursuant to which the Note is issued.
"GOVERNMENTAL AUTHORITY" means any nation or government, any federal,
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative function of
government.
"GRANT" means mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, grant, transfer, create, and grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to the Indenture. A Grant of the Note Collateral or of any other
agreement or instrument included therein shall include all rights, powers and
options (but none of the obligations) of the Granting party thereunder,
including the immediate and continuing right to claim for, collect, receive and
give receipt for payments in respect of the Note Collateral and all other moneys
payable thereunder, to give and receive notices and other communications, to
make waivers or other agreements, to exercise all rights and options, to bring
Proceedings in the name of the Granting party or otherwise and generally to do
and receive anything that the Granting party is or may be entitled to do or
receive thereunder or with respect thereto.
"GRANT AGREEMENT" means that certain Agreement Relating to Grant of
Intangible Transition Property dated as of December __, 1998 between Illinois
Power and the Grantee, as the same may be amended, supplemented or otherwise
modified from time to time.
"GRANTEE" means Illinois Power Securitization Limited Liability
Company, a Delaware limited liability company, and any successor in interest to
the extent permitted under the Sale Agreement and the other Basic Documents.
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<PAGE>
"HOLDER" means the Person in whose name a Note is registered on the
Note Register.
"ICC" means the Illinois Commerce Commission, or any successor
thereto.
"ICC REGULATIONS" means the regulations, including proposed, emergency
or temporary regulations, promulgated under the Public Utilities Act.
"IFC" means the instrument funding charge as defined in Section 18-102
of the Funding Law (expressed in cents per kilowatt-hour) and as authorized by a
Funding Order, including, without limitation, each "IFC" or equivalent amount
which Customers agree to pay pursuant to any contract under which Illinois Power
agrees to provide non-tariffed electrical service and which are deemed to be
proceeds of the Intangible Transition Property in accordance with the terms of
the applicable Funding Order.
"IFC COLLECTIONS" means IFCs received by the Servicer which are
remitted to the Collection Account.
"IFC CUSTOMER CLASS" has the meaning set forth in Annex I of the
Servicing Agreement.
"IFC PAYMENTS" means the payments made by Customers based on the IFCs.
"INDENTURE" means the Indenture dated as of December __, 1998 between
the Note Issuer and the Indenture Trustee as originally executed and, as from
time to time supplemented or amended by one or more Trust Issuance Certificates
or indentures supplemental thereto entered into pursuant to the applicable
provisions of the Indenture, as so supplemented or amended, or both, and shall
include the forms and terms of the Notes established thereunder.
"INDENTURE TRUSTEE" means Harris Trust and Savings Bank, an Illinois
banking corporation, as Indenture Trustee under the Indenture, or any successor
Indenture Trustee under the Indenture.
"INDEPENDENT" means, when used with respect to any specified Person,
that the Person (a) is in fact independent of the Note Issuer, any other obligor
on the Notes, the Grantee, the Servicer and any Affiliate of any of the
foregoing Persons, (b) does not have any direct financial interest or any
material indirect financial interest in the Note Issuer, any such other obligor,
the Grantee, the Servicer or any Affiliate of any of the foregoing Persons and
(c) is not connected with the Note Issuer, any such other obligor, the Grantee,
the Servicer or any Affiliate of any of the foregoing Persons as an officer,
10
<PAGE>
employee, promoter, underwriter, trustee, partner, director or person performing
similar functions.
"INDEPENDENT CERTIFICATE" means a certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.01 of the
Indenture, made by an Independent appraiser or other expert appointed by an
Issuer Order and consented to by the Indenture Trustee, and such opinion or
certificate shall state that the signer has read the definition of "Independent"
in the Indenture and that the signer is Independent within the meaning thereof.
"INDIRECT PARTICIPANT" means a securities broker, dealer, bank, trust
company or other Person that clears through or maintains a custodial
relationship with a Clearing Agency Participant, either directly or indirectly.
"INSOLVENCY EVENT" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable Federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs, and such decree or order
shall remain unstayed and in effect for a period of 60 consecutive days; or (b)
the commencement by such Person of a voluntary case under any applicable Federal
or state bankruptcy, insolvency or other similar law now or hereafter in effect,
or the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due, or the taking of action by such
Person in furtherance of any of the foregoing.
"INSOLVENCY LAW" means any applicable Federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect.
"INTANGIBLE TRANSITION PROPERTY" or "ITP" means all intangible
transition property as defined in Section 18-102 of the Funding Law created in
favor of the Grantee pursuant to a Funding Order and assigned to the Note Issuer
pursuant to a Sale Agreement, including the 1998 Transition Property and any
Subsequent Transition Property, and, including, without limitation, all
Allocable IFC Revenue Amounts.
"INVESTMENT EARNINGS" means investment earnings on funds deposited in
the Collection Account net of losses and investment expenses.
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"ISSUER ORDER" and "ISSUER REQUEST" mean a written order or request
signed in the name of the Note Issuer by any one of its Responsible Officers and
delivered to the Indenture Trustee or Paying Agent, as applicable.
"LEGAL DEFEASANCE OPTION" is defined in Section 4.01(b) of the
Indenture.
"LETTER OF REPRESENTATIONS" means any applicable agreement among the
Note Issuer, the Indenture Trustee, the Administrator and the applicable
Clearing Agency, with respect to such Clearing Agency's rights and obligations
(in its capacity as a Clearing Agency) with respect to any Book-Entry Notes, as
the same may be amended, supplemented, restated or otherwise modified from time
to time.
"LIEN" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind other than tax liens, mechanics' liens and any liens
that attach by operation of law.
"MINIMUM DENOMINATION" means, with respect to any Note, the minimum
denomination therefor specified in the applicable Trust Issuance Certificate or
Series Supplement, if any, which minimum denomination shall be not less than
$[1,000] and, except as otherwise provided in such Trust Issuance Certificate or
Series Supplement, if any, integral multiples thereof.
"MONTHLY REMITTANCE DATE" means the tenth day of each calendar month
or, if such day is not a Business Day, the next succeeding Business Day.
"MONTHLY SERVICER'S CERTIFICATE" means a certificate, substantially in
the form of EXHIBIT A to the Servicing Agreement, completed and executed by a
Responsible Officer of the Servicer pursuant to Section 3.01(b)(i) of the
Servicing Agreement.
"MOODY'S" means Moody's Investors Service Inc. or any successor
thereto.
"NOTE COLLATERAL" has the meaning specified in the Granting Clause of
the Indenture.
"NOTE DEPOSITORY" means the depositary from time to time selected by
the Indenture Trustee on behalf of the Note Issuer in whose name the Notes are
registered prior to the issuance of Definitive Notes. The initial Note
Depository shall be Cede & Co., the nominee of the initial Clearing Agency.
"NOTE DEPOSITORY AGREEMENT" means the agreement, dated as of the
Closing Date, among the Note Issuer, the Indenture Trustee and the DTC, as the
initial Clearing Agency relating to the Notes, as the same may be amended,
supplemented or otherwise modified from time to time.
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"NOTE INTEREST RATE" means, with respect to any Series or Class of
Notes, the rate at which interest accrues on the Notes of such Series or Class,
as specified in the related Trust Issuance Certificate or Series Supplement, if
any.
"NOTE ISSUER" means Illinois Power Special Purpose Trust, a Delaware
business trust named as such in the Indenture until a successor replaces it and,
thereafter, means the successor and, for purposes of any provision contained
herein and required by the TIA, each other obligor on the Notes.
"NOTE OWNER" means with respect to a Book-Entry Note, the Person who
is the beneficial owner of such Book-Entry Note, as reflected on the books of
the Clearing Agency, or on the books of a Person maintaining an account with
such Clearing Agency (directly as a Clearing Agency Participant or as an
Indirect Participant, in each case in accordance with the rules of such Clearing
Agency).
"NOTE REGISTER" means the register maintained pursuant to Section 2.05
of the Indenture, providing for the registration of the Notes and transfers and
exchanges thereof.
"NOTE REGISTRAR" means the registrar at any time of the Note Register,
appointed pursuant to Section 2.05 of the Indenture.
"NOTES" means one or more Series of Notes authorized by the 1998
Funding Order and any Subsequent Funding Order and issued under the Indenture.
"OFFICER'S CERTIFICATE" means a certificate signed by a Responsible
Officer of the Note Issuer under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01 of the Indenture,
and delivered to the Indenture Trustee. Unless otherwise specified, any
reference in the Indenture to an Officer's Certificate shall be to an Officer's
Certificate of any Responsible Officer of the party delivering such certificate.
"OPERATING AGREEMENT" means the Amended and Restated Limited Liability
Company Agreement of the Grantee dated as of December 2, 1998 executed by
Illinois Power as sole member of the Grantee.
"OPERATING EXPENSES" means all fees, costs and expenses of the Note
Issuer, including all amounts owed by the Note Issuer to the Indenture Trustee
and the Delaware Trustee, the Servicing Fee, the Administration Fee, any fees,
costs and expenses payable or reimbursable by the Note Issuer to the
Administrator and legal and accounting fees, costs and expenses of the Note
Issuer and the Grantee.
"OPINION OF COUNSEL" means one or more written opinions of counsel who
may, except as otherwise expressly provided in the Basic Documents, be employees
of or
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counsel to the party providing such opinion of counsel, which counsel shall
be acceptable to the party receiving such opinion of counsel, and shall be in
form and substance acceptable to such party.
"OPTIONAL REDEMPTION DATE" means, with respect to any Series of Notes,
the Payment Date specified for the redemption of the Notes of such Series
pursuant to Section 10.01 of the Indenture.
"OPTIONAL REDEMPTION PRICE" is defined in Section 10.01 of the
Indenture.
"OUTSTANDING" means, as of the date of determination, all Notes
theretofore authenticated and delivered under this Indenture except:
(a) Notes theretofore canceled by the Note Registrar or delivered to
the Note Registrar for cancellation;
(b) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Indenture
Trustee or any Paying Agent in trust for the Holders of such Notes
(PROVIDED, HOWEVER, that if such Notes are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision
therefor, satisfactory to the Indenture Trustee, made); and
(c) Notes in exchange for or in lieu of other Notes which have been
authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes
are held by a bona fide purchaser;
PROVIDED that in determining whether the Holders of the requisite Outstanding
Amount of the Notes or any Series or Class thereof have given any request,
demand, authorization, direction, notice, consent or waiver hereunder or under
any Basic Document, Notes owned by the Note Issuer, any other obligor upon the
Notes, the Grantee or any Affiliate of any of the foregoing Persons shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Indenture Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only Notes
that the Indenture Trustee actually knows to be so owned shall be so
disregarded. Notes so owned that have been pledged in good faith may be
regarded as outstanding if the pledgee establishes to the satisfaction of the
Indenture Trustee the pledgee's right so to act with respect to such Notes and
that the pledgee is not the Note Issuer, any other obligor upon the Notes, the
Grantee or any Affiliate of any of the foregoing Persons.
"OUTSTANDING AMOUNT" means the aggregate principal amount of all Notes
or, if the context requires, all Notes of a Series or Class, Outstanding at the
date of determination.
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"OVERCOLLATERALIZATION SUBACCOUNT" is defined in Section 8.02(a) of
the Indenture.
"PAYING AGENT" means with respect to the Indenture, the Indenture
Trustee or any other Person that meets the eligibility standards for the
Indenture Trustee specified in Section 6.11 of the Indenture and is authorized
by the Note Issuer to direct the Servicer to make the payments to and
distributions from the Collection Account, including payment of principal of or
interest on the Notes on behalf of the Note Issuer.
"PAYMENT DATE" means, with respect to any Series or Class of Notes,
March 25, June 25, September 25 and December 25 of each year, PROVIDED that if
any such date is not a Business Day, the Payment Date shall be the Business Day
immediately succeeding such date, commencing _________ 25, 1999.
"PERSON" means any individual, corporation, limited liability company,
estate, partnership, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization or government
or any agency or political subdivision thereof.
"PREDECESSOR NOTE" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note, and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.06 of the Indenture in lieu of a
mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same
debt as the mutilated, lost, destroyed or stolen Note.
"PRINCIPAL BALANCE" means, as of any Payment Date, the sum of the
outstanding principal amount of each Series of Notes.
"PROCEEDING" means any suit in equity, action at law or other judicial
or administrative proceeding.
"PROJECTED PRINCIPAL BALANCE" means, as of any Payment Date, the sum
of the projected outstanding principal amount of each Series of Notes for such
Payment Date set forth in the Expected Amortization Schedule.
"PUBLIC UTILITIES ACT" means the Illinois Public Utilities Act, 220
ILCS 5/1-101 ET SEQ., as the same may be amended from time to time.
"QUARTERLY INTEREST" means, with respect to any Payment Date and any
Series of Notes, the quarterly interest for such Payment Date and Series as
specified in the related Trust Issuance Certificate or Series Supplement, if
any.
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"QUARTERLY PRINCIPAL" means, with respect to any Payment Date and any
Series of Notes, the excess, if any, of the Outstanding Amount of such Series of
Notes over the outstanding principal balance specified for such Payment Date on
the applicable Expected Amortization Schedule.
"QUARTERLY SERVICER'S CERTIFICATE" means a certificate, substantially
in the form of EXHIBIT D to the Servicing Agreement, completed and executed by a
Responsible Officer of the Servicer pursuant to Section 4.01(c)(ii) of the
Servicing Agreement.
"RATING AGENCY" means Moody's, Standard & Poor's, Duff & Phelps and
Fitch IBCA. If no such organization or successor is any longer in existence,
"Rating Agency" shall be a nationally recognized statistical rating organization
or other comparable Person designated by the Note Issuer, notice of which
designation shall be given to the Indenture Trustee and the Servicer.
"RATING AGENCY CONDITION" means, with respect to any action, that each
Rating Agency shall have been given ten days prior notice thereof and that each
of the Rating Agencies shall have notified the Servicer, the Note Issuer and the
Indenture Trustee in writing that such action will not result in a reduction or
withdrawal of the then current rating by such Rating Agency of either any Series
or Class of Notes.
"RECONCILIATION PERIOD" means (i) the period commencing on the Closing
Date and ending on May 31, 1999, and (ii) thereafter, as applicable, either (A)
the period commencing on June 1 and ending November 30 or (B) the period
commencing on December 1 and ending May 31.
"RECORD DATE" means, with respect to a Payment Date or Redemption
Date, in the case of Definitive Notes, the close of business on the last day of
the calendar month preceding the calendar month in which such Payment Date or
Redemption Date occurs, and in the case of Book Entry Notes, one Business Day
prior to the applicable Payment Date or Redemption Date.
"REDEMPTION DATE" means, with respect to any Series or Class of Notes,
the Payment Date specified by the Note Issuer for the redemption of the Notes of
such Series or Class pursuant to Section 10.01 of the Indenture.
"REDEMPTION PAYMENT" means with respect to any Series or Class of
Notes, any payment of principal of and interest on the Notes of such Series or
Class due from the Note Issuer upon the early redemption of such Series or Class
of Notes, other than any such payment due by reason of the occurrence of an
Event of Default with respect to such Series or Class of Notes.
"REDEMPTION PRICE" means with respect to any Series or Class of Notes,
the unpaid principal amount of the Notes of such Series or Class redeemed, plus
accrued
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and unpaid interest thereon at the interest rate applicable to such
Series or Class to but excluding the Redemption Date.
"REGISTERED HOLDER" means the Person in whose name a Note is
registered on the Note Register on the applicable Record Date.
"REGISTRATION STATEMENT" means the registration statement, Form S-3
Registration No. 333-63537, filed with the SEC for registration under the
Securities Act relating to the offering and sale of the Notes, and including all
supplements thereto.
"RELATED ASSETS" means all of Grantee's and/or the Note Issuer's
right, title and interest in and to the Grant Agreement, the Sale Agreement, the
Servicing Agreement and all present and future claims, demands, causes and
choses in action in respect of all of the foregoing and all payments on or under
and all proceeds of every kind and nature whatsoever in respect of any or all of
the foregoing, including all proceeds of the conversion, voluntary or
involuntary, into cash or other liquid property, all cash proceeds, accounts,
accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit
accounts, insurance proceeds, condemnation awards, rights to payment of any and
every kind, and other forms of obligations and receivables, instruments and
other property which in any time constitute all or part of or are included in
the proceeds of any of the foregoing.
"REQUIRED CAPITAL LEVEL" means, with respect to each Series of Notes,
an amount equal to 0.50% of the initial principal amount of such Series,
deposited into the Capital Subaccount by the Grantee prior to or upon the
issuance of such Series, less $100,000 in the aggregate from all Series of
Notes.
"REQUIRED DEBT SERVICE" for any Applicable Period means the total
dollar amount of IFC Collections reasonably calculated by the Servicer in
accordance with SECTION 4.01 of the Servicing Agreement as necessary to be
received during such period (after giving effect to the allocation and
distribution of amounts on deposit in the Reserve Subaccount at the time of
calculation and which are available for payments on the Notes and including any
shortfalls in Required Debt Service for any prior Applicable Period) in order to
ensure that, as of the last Payment Date occurring in such Applicable Period,
(1) all accrued and unpaid interest on the Notes then due shall have been paid
in full, (2) the Principal Balance of the Notes is equal to the Projected
Principal Balance, (3) the balance on deposit in the Overcollateralization
Subaccount equals the aggregate Required Overcollateralization Level, (4) the
balance on deposit in the Capital Subaccount equals the aggregate Required
Capital Level and (5) all other fees and expenses due and owing and required or
allowed to be paid under SECTION 8.02 of the Note Indenture as of such date
shall have been paid in full; PROVIDED, that, with respect to any Adjustment
occurring after the last Expected Maturity Date for any Notes, the Required Debt
Service shall be calculated to ensure that sufficient IFCs will be collected to
retire such Notes in full as of
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the earlier of (x) the Payment Date preceding the next Adjustment Date and
(y) the Final Maturity Date for such Notes.
"REQUIRED DEPOSIT RATING" means a rating on short-term unsecured debt
obligations of P-1 by Moody's, A-1+ by S&P, and, if rated by Fitch IBCA, F-1+ by
Fitch IBCA and if rated by Duff & Phelps, D-1+ by Duff & Phelps. Any
requirement that short-term unsecured debt obligations have the "Required
Deposit Rating" shall mean that such short-term unsecured debt obligations have
the foregoing required ratings from each of such rating agencies.
"REQUIRED OVERCOLLATERALIZATION LEVEL" means, as of any Payment Date
with respect to any Series, the amount required to be on deposit in the
Overcollateralization Subaccount as specified in the applicable Trust Issuance
Certificate or Series Supplement, if any, but not less than, as of the Scheduled
Maturity Date for such Series, 0.5% of the initial Outstanding amount thereof.
"REQUIREMENT OF LAW" means any foreign, federal, state or local laws,
statutes, regulations, rules, codes or ordinances enacted, adopted, issued or
promulgated by any Governmental Authority or common law.
"RESERVE SUBACCOUNT" is defined in Section 8.02(a) of the Indenture.
"RESPONSIBLE OFFICER" means with respect to (a) the Note Issuer, any
officer within the Corporate Trust Office of the Delaware Trustee; (b) with
respect to the Indenture Trustee, the Delaware Trustee or other trustee, any
officer within the Corporate Trust office of such trustee (including, in the
case of (a) and (b) above, the President, any Vice President, Assistant Vice
President, Secretary or Assistant Treasurer or any other officer or assistant
officer of such Person customarily performing functions similar to those
performed by any of the chosen designated officers and also, with respect to a
particular matter, any other officer to whom such matter is referred to because
of such officer's knowledge and familiarity with the particular subject); (c)
any corporation, the Chief Executive Officer, the President, any Senior Vice
President or Vice President, the Chief Financial Officer, Treasurer or any other
duly authorized officer of such Person who has been authorized to act in the
circumstances;(d) the Grantee, any Manager or duly authorized officer who has
been authorized to act in the circumstances; (e) partnership, any general
partner thereof; and (f) any other Person (other than an individual), any duly
authorized officer or member of such Person, as the context may require, who is
authorized to act in matters relating to such Person.
"SALE AGREEMENT" means as the context may require, either (i) the
Intangible Transition Property Sale Agreement dated as of December __, 1998
between the Grantee and the Note Issuer, as the same may be amended,
supplemented or otherwise modified from time to time or (ii) any Subsequent Sale
Agreement.
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"SCHEDULED PAYMENT DATE" is defined in the applicable Trust Issuance
Certificate or Series Supplement, if any, with respect to each Series or Class
of Notes.
"SEC" means the Securities and Exchange Commission.
"SECRETARY OF STATE" means the Secretary of State of the State of
Delaware or the Secretary of State of the State of Illinois, as the case may be,
or any Governmental Authority succeeding to the duties of such offices.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SERIES" means each series of Notes issued and authenticated pursuant
to the Indenture and a related Trust Issuance Certificate or Series Supplement,
if any.
"SERIES ISSUANCE DATE" means, with respect to any Series, the date on
which the Notes of such Series are to be originally issued in accordance with
Section 2.10 of the Indenture and the related Trust Issuance Certificate or
Series Supplement, if any.
"SERIES SUPPLEMENT" means an indenture supplemental to the Indenture
that authorizes the issuance of a particular Series of Notes.
"SERVICER" means Illinois Power, as Servicer under the Servicing
Agreement, or any successor Servicer to the extent permitted under the Servicing
Agreement.
"SERVICER BUSINESS DAY" means any day other than a Saturday, Sunday or
holiday on which the Servicer maintains normal office hours and conducts
business.
"SERVICER DEFAULT" is defined in Section 7.01 of the Servicing
Agreement.
"SERVICER'S CERTIFICATE" means an Officer's Certificate of the
Servicer.
"SERVICING AGREEMENT" means the Intangible Transition Property
Servicing Agreement dated as of December __, 1998, between the Grantee and
Illinois Power assigned to the Note Issuer, as the same may be amended,
supplemented or otherwise modified from time to time.
"SERVICING FEE" means the fee payable to the Servicer on each Payment
Date for services rendered during the period from, but not including, the
preceding Payment Date to and including the current Payment Date, determined
pursuant to Section 6.06 of the Servicing Agreement.
"SOLE MEMBER" means Illinois Power as sole member of the Grantee
defined in the Operating Agreement.
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"SPECIAL PAYMENT" means with respect to any Series or Class of Notes,
any payment of principal of or interest on (including any interest accruing upon
default), or any other amount in respect of, the Notes of such Series or Class
(including, with respect to Floating Rate Notes only, a payment under any Swap)
that is not actually paid within five days of the Payment Date applicable
thereto.
"SPECIAL PAYMENT DATE" means the date on which a Special Payment is to
be made by the Indenture Trustee to the Holders.
"SPECIAL RECORD DATE" means with respect to any Special Payment Date,
the close of business on the 15th day (whether or not a Business Day) preceding
such Special Payment Date.
"STANDARD & POOR'S" means Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. or any successor thereto.
"STATE" means any one of the 50 states of the United States of America
or the District of Columbia.
"STATE PLEDGE" means the pledge of the State of Illinois as set forth
in Section 18-105(b) of the Funding Law.
"SUBSEQUENT CLOSING DATE" means any date (other than the Closing Date)
specified in a Trust Issuance Certificate or Series Supplement, if any, under
which Notes of any Series or Class are issued.
"SUBSEQUENT CREATION DATE" means any date on which Subsequent
Intangible Transition Property is created in favor of the Grantee pursuant to a
Subsequent Funding Order.
"SUBSEQUENT FUNDING ORDER" means a transitional funding order (other
than the 1998 Funding Order) issued hereafter by the ICC in favor of the Grantee
at the request of Illinois Power.
"SUBSEQUENT GRANT AGREEMENT" means an agreement substantially similar
to the Grant Agreement, relating to Subsequent Transition Property, as the same
may be amended, supplemented or otherwise modified from time to time.
"SUBSEQUENT RELATED ASSETS" means all of the Grantee's and/or the Note
Issuer's right, title and interest in and to any Subsequent Grant Agreement and
all present and future claims, demands, causes and choses in action in respect
of any or all of the foregoing and all payments on or under and all proceeds of
every kind and nature whatsoever in respect of any or all of the foregoing,
including all proceeds of the conversion, voluntary or involuntary, into cash or
other liquid property, all cash proceeds,
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accounts, accounts receivable, notes, drafts, acceptances, chattel paper,
checks, deposit accounts, insurance proceeds, condemnation awards, rights to
payment of any and every kind, and other forms of obligations and
receivables, instruments and other property which in any time constitute all
or part of or are included in the proceeds of any of the foregoing.
"SUBSEQUENT SALE AGREEMENT" means an agreement substantially similar
to the initial Sale Agreement, relating to Subsequent Intangible Transition
Property, as the same may be amended, supplemented or otherwise modified from
time to time.
"SUBSEQUENT SALE DATE" means any date on which Subsequent Intangible
Transition Property is to be sold to the Note Issuer pursuant to a Subsequent
Sale Agreement.
"SUBSEQUENT TARIFF" means a Tariff filed with the ICC in connection
with a Subsequent Funding Order.
"SUBSEQUENT TRANSITION PROPERTY" or "SUBSEQUENT ITP" means the
intangible transition property contemplated by, and specifically described in, a
Subsequent Funding Order.
"SUCCESSOR SERVICER" is defined in Section 3.07(e) of the Indenture.
"SWAP" means an interest rate swap, cap, floor, collar or other
hedging transaction that may be entered into by the Note Issuer for the purpose
of managing interest rate risk with respect to a specified Series or Class of
Floating Rate Notes that are being issued concurrently with the execution of the
Swap.
"SWAP AGREEMENT" means an Interest Rate and Currency Exchange
Agreement (including the Schedule and Confirmation thereto) entered into between
the Note Issuer and a swap provider.
"SWAP COUNTERPARTY" means the entity that is a party to a Swap with
the Note Issuer.
"SWAP PAYMENT" means the payments made by the Note Issuer to the Swap
Counterparty pursuant to any Swap, subject to any netting of payments provided
in the applicable Swap.
"SWAP REVENUES" means the payments paid by a Swap Counterparty to the
Note Issuer pursuant to any Swap, subject to any netting of payments provided in
the applicable Swap.
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"TARIFF" means any rate tariff filed with the ICC pursuant to the
Funding Law to evidence any IFCs.
"TEMPORARY NOTES" means Notes executed, and upon the receipt of an
Issuer Order, authenticated and delivered by the Indenture Trustee pending the
preparation of Definitive Notes pursuant to Section 2.04 of the Indenture.
"TREASURY REGULATIONS" means the regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to
specific provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"TRUST AGREEMENT" means the Declaration of Trust by First Union Trust
Company, National Association as "Delaware Trustee", and Cynthia G. Steward and
Eric B. Weekes as "Beneficiary Trustees" dated as of December 1, 1998
acknowledged and agreed to by the Grantee, as the same may be amended,
supplemented or otherwise modified from time to time.
"TRUST ESTATE" means all right, title and interest of the Note Issuer
in, to and under the property and rights assigned to the Note Issuer pursuant to
the Sale Agreement, all funds on deposit from time to time in the Collection
Account and all other property of or interests of the Note Issuer from time to
time, including all rights, interests and claims of the Delaware Trustee and the
Note Issuer under or in connection with any Basic Documents.
"TRUST INDENTURE ACT" or "TIA" means the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, as in force on the Closing
Date, unless otherwise specifically provided.
"TRUST ISSUANCE CERTIFICATE" means a certificate executed by an
Authorized Officer of the Delaware Trustee on behalf of the Trust in accordance
with the terms of the Sale Agreement or any Subsequent Sale Agreement and
delivered to the Indenture Trustee under Section 2.01 of the Indenture
substantially in the form attached as EXHIBIT C to the Indenture.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
"UNDERWRITERS" means the underwriters who purchase Notes of any Series
or Class from the Note Issuer and sell such Notes in a public offering.
"UNDERWRITING AGREEMENT" means the Underwriting Agreement, dated as of
December __, 1998 among Illinois Power, the Underwriters party thereto, on their
own
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behalf and as representatives of the several underwriters named therein, and
the Note Issuer.
"UNREGISTERED NOTES" means any Notes not registered under the
Securities Act or the securities laws of any other jurisdiction.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the Note Issuer's option.
B. OTHER TERMS. All accounting terms not specifically defined herein
shall be construed in accordance with United States generally accepted
accounting principles. To the extent that the definitions of accounting terms
in any Basic Document are inconsistent with the meanings of such terms under
generally accepted accounting principles or regulatory accounting principles,
the definitions contained in such Basic Document shall control. All terms used
in Article 9 of the UCC in the State of Illinois and not specifically defined
herein, are used herein as defined in such Article 9. As used in the Basic
Documents, the term "INCLUDING" means "including without limitation," and other
forms of the verb "to include" have correlative meanings. All references to any
Person shall include such Person's permitted successors.
C. COMPUTATION OF TIME PERIODS. Unless otherwise stated in any of
the Basic Documents, as the case may be, in the computation of a period of time
from a specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to but excluding".
D. REFERENCE; CAPTIONS. The words "hereof", "herein" and "hereunder"
and words of similar import when used in any Transaction Document shall refer to
such Transaction Document as a whole and not to any particular provision of such
Transaction Document; and references to "SECTION", "SUBSECTION", "SCHEDULE" and
"EXHIBIT" in any Basic Document are references to Sections, subsections,
Schedules and Exhibits in or to such Transaction Document unless otherwise
specified in such Basic Document. The various captions (including the tables of
contents) in each Basic Document are provided solely for convenience of
reference and shall not affect the meaning or interpretation of any Basic
Document.
E. The definitions contained in this APPENDIX A are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter forms of such terms.
23
<PAGE>
[Letterhead]
EXHIBIT 5.1
December 8, 1998
Illinois Power Special Purpose Trust
c/o Illinois Power Company
500 South 27th Street
Decatur, IL 62521
Re: ILLINOIS POWER SPECIAL PURPOSE TRUST
Ladies and Gentlemen:
We have acted as counsel to Illinois Power Company, an Illinois
corporation (the "Company"), Illinois Power Securitization Limited Liability
Company, a special purpose Delaware limited liability company ("IPS") and
Illinois Power Special Purpose Trust, a Delaware business trust (the
"Trust") in connection with the Registration Statement on Form S-3, as
amended to the date hereof (the "Registration Statement") filed with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Trust's Transitional
Funding Trust Notes (the "Notes") to be offered and sold from time to time as
described in the form of preliminary Prospectus and preliminary Prospectus
Supplement (collectively, the "Prospectus") included as part of the
Registration Statement. Capitalized terms used in this letter and not
defined have the meanings given to them in the Prospectus.
We are familiar with the proceedings taken and proposed to be taken by
the Company, IPS and the Trust, in connection with the proposed
authorization, issuance and sale of the Notes by the Trust. In this
connection, we have examined and relied upon such records and other
documents, instruments and certificates and have made such other
investigation as we deemed appropriate as the basis for the opinions set
forth below. In our examination we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents
of documents submitted to us as certified, conformed or photostatic copies
and the authenticity of such original documents. We have relied, as to
matters of Delaware law, upon the opinion of Richards, Layton & Finger, P.A.,
special Delaware counsel to the Company, the Trust and IPS, which opinion has
been filed as an exhibit to the Registration Statement.
<PAGE>
Illinois Power Special Purpose Trust
December 8, 1998
Page 2
The opinions expressed below are based on the following assumptions:
(a) The Registration Statement will have become effective under the
Securities Act, and a Prospectus Supplement to the Prospectus, describing the
terms of the Notes, will have been filed with the Commission pursuant to Rule
424 under the Securities Act;
(b) The proposed transactions will have been carried out on the basis set
forth in the Registration Statement and in conformity with the authorizations
contained in the Transitional Funding Order dated September 10, 1998 issued by
the Illinois Commerce Commission in Docket No. 98-0488;
(c) Prior to the issuance of any Notes:
(i) all tariffs required to be filed pursuant to the Funding Law
and the Transitional Funding Order relating to the IFC charges
relating to the Intangible Transition Property will have been
filed with the ICC and become effective, and the Transitional
Funding Order will remain valid and in effect;
(ii) the Indenture will have been executed and delivered by the
Trust's authorized representative and Harris Trust and Savings
Bank, as trustee;
(iii) the maturity dates, the interest rates, the redemption
provisions and the other terms of the Notes being offered will
have been fixed in accordance with the provisions of the
Indenture;
(iv) the Grant Agreement between the Company and IPS will have been
executed and delivered;
(v) the Sale Agreement between the Trust and IPS will have been
executed and delivered; and
(vi) the Servicing Agreement and the Administration Agreement, each
between the Company and IPS, will have been executed and
delivered.
(d) The Indenture will have been qualified in accordance with the
provisions of the Trust Indenture Act of 1939, as amended.
<PAGE>
Illinois Power Special Purpose Trust
December 8, 1998
Page 3
Based on and subject to the foregoing, we are of the opinion that the
Notes will be legally issued, valid and binding obligations of the Trust,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally and to general
principles of equity, at such time as the Notes are properly executed,
authenticated, delivered and paid for as provided in the Indenture and upon
satisfaction of all conditions contained in the Indenture and the
Underwriting Agreement.
We express no opinion as to the application of the securities or blue
sky laws of the various states to the issuance and sale of the Notes.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the references to us under the captions "Risk
Factors -- Legal Challenges Which Could Adversely Affect Noteholders; --
Possible Payment Delays or Losses as a Result of Amendment or Repeal of
Amendatory Act or Breach of State Pledge" and "Legal Matters" in the
Prospectus contained in the Registration Statement.
Very truly yours,
SCHIFF HARDIN & WAITE
By: /s/ Robert J. Regan
-----------------------------------
Robert J. Regan
RJR:mk
<PAGE>
EXHIBIT 10.1
FORM OF SALE AGREEMENT
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INTANGIBLE TRANSITION PROPERTY SALE AGREEMENT
between
ILLINOIS POWER SECURITIZATION LIMITED LIABILITY COMPANY
Grantee
and
ILLINOIS POWER SPECIAL PURPOSE TRUST
Note Issuer
Dated as of December ___, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . .1
SECTION 1.02. Other Definitional Provisions . . . . . . . . . . . . . . .1
ARTICLE II
Conveyance of 1998 Transition Property and Related Assets. . . . . . . . . . 2
SECTION 2.01. Conveyance of 1998 Transition Property and
Related Assets. . . . . . . . . . . . . . . . . . . . . . .2
ARTICLE III
Representations and Warranties of Grantee . . . . . . . . . . . . . . . . . .4
SECTION 3.01. Organization and Good Standing. . . . . . . . . . . . . . .4
SECTION 3.02. Due Qualification . . . . . . . . . . . . . . . . . . . . .4
SECTION 3.03. Power and Authority . . . . . . . . . . . . . . . . . . . .4
SECTION 3.04. Binding Obligation. . . . . . . . . . . . . . . . . . . . .5
SECTION 3.05. No Violation. . . . . . . . . . . . . . . . . . . . . . . .5
SECTION 3.06. No Proceedings. . . . . . . . . . . . . . . . . . . . . . .5
SECTION 3.07. Approvals . . . . . . . . . . . . . . . . . . . . . . . . .6
SECTION 3.08. The 1998 Transition Property and Related Assets . . . . . .6
ARTICLE IV
Covenants of the Grantee. . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 4.01. Corporate Existence . . . . . . . . . . . . . . . . . . . 11
SECTION 4.02. No Liens. . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 4.03. Delivery of Collections . . . . . . . . . . . . . . . . . 12
SECTION 4.04. Notice of Liens . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.05. Compliance with Law . . . . . . . . . . . . . . . . . . . 12
SECTION 4.06. Covenants Related to the 1998 Transition Property,
Related Assets and the Notes. . . . . . . . . . . . . . . 12
SECTION 4.07. Protection of Title . . . . . . . . . . . . . . . . . . . 13
SECTION 4.08. Nonpetition Covenants . . . . . . . . . . . . . . . . . . 14
SECTION 4.09. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 4.10. Performance of Obligations; Servicing . . . . . . . . . . 15
SECTION 4.11. Additional Negative Covenants . . . . . . . . . . . . . . 17
SECTION 4.12. No Other Business . . . . . . . . . . . . . . . . . . . . 17
SECTION 4.13. No Borrowing. . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 4.14. Guarantees Loans, Advances and Other Liabilities. . . . . 17
SECTION 4.15. Capital Expenditures. . . . . . . . . . . . . . . . . . . 18
SECTION 4.16. Notice of Defaults. . . . . . . . . . . . . . . . . . . . 18
SECTION 4.17. Separate Existence. . . . . . . . . . . . . . . . . . . . 18
i
<PAGE>
SECTION 4.18. Further Instruments and Acts. . . . . . . . . . . . . . . 20
SECTION 4.19. Subsequent Transition Property. . . . . . . . . . . . . . 20
ARTICLE V
The Grantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 5.01. Liability of Grantee; Indemnities . . . . . . . . . . . . 23
SECTION 5.02. Merger or Consolidation of, or Assumption of
the Obligations of, Grantee . . . . . . . . . . . . . . . 24
SECTION 5.03. Limitation on Liability of Grantee and Others . . . . . . 25
ARTICLE VI
Miscellaneous Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 6.01. Amendment . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 6.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 6.03. Assignment. . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 6.04. Limitations on Rights of Others . . . . . . . . . . . . . 28
SECTION 6.05. Severability. . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 6.06. Separate Counterparts . . . . . . . . . . . . . . . . . . 29
SECTION 6.07. Headings. . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 6.08. Governing Law . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 6.09. Assignment to Indenture Trustee . . . . . . . . . . . . . 29
SECTION 6.10. Limitation of Liability . . . . . . . . . . . . . . . . . 29
SECTION 6.11. Limitation of Liability . . . . . . . . . . . . . . . . . 30
SECTION 6.12. Holders as Third-Party Beneficiaries. . . . . . . . . . . 30
SECTION 6.13. Representations and Indemnities to Survive. . . . . . . . 31
</TABLE>
ii
<PAGE>
INTANGIBLE TRANSITION PROPERTY SALE AGREEMENT dated as of December ___,
1998 between ILLINOIS POWER SECURITIZATION LIMITED LIABILITY COMPANY, a Delaware
limited liability company (the "Grantee"), and ILLINOIS POWER SPECIAL PURPOSE
TRUST, a Delaware business trust (the "Note Issuer").
WHEREAS the Note Issuer desires to purchase the 1998 Transition Property
created pursuant to the Public Utilities Act and the 1998 Funding Order,
together with the Related Assets; and
WHEREAS the Grantee is willing to sell such 1998 Transition Property and
Related Assets to the Note Issuer.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. Capitalized terms used herein and not
otherwise defined herein have the meanings assigned to them in that certain
Indenture (including Appendix A thereto) dated as of the date hereof between the
Note Issuer and Harris Trust and Savings Bank, as the Indenture Trustee, as the
same may be amended, supplemented or otherwise modified from time to time.
SECTION 1.02. OTHER DEFINITIONAL PROVISIONS.
(a) "AGREEMENT" means this Intangible Transition Property Sale Agreement,
as the same may be amended, supplemented or otherwise modified from time to
time.
<PAGE>
(b) Non-capitalized terms used herein which are defined in the Public
Utilities Act shall, as the context requires, have the meanings assigned to such
terms in the Public Utilities Act, but without giving effect to amendments to
the Public Utilities Act after the date hereof which have a material adverse
effect on the Note Issuer or the Holders.
(c) All terms defined in this Agreement shall have the defined meaning
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(d) The words "hereof," "herein," "hereunder" and words of similar import,
when used in this Agreement, shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Section, Schedule and Exhibit
references contained in this Agreement are references to Sections, Schedules and
Exhibits in or to this Agreement unless otherwise specified; and the term
"including" shall mean "including without limitation".
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter forms of such terms.
ARTICLE II
CONVEYANCE OF 1998 TRANSITION PROPERTY AND RELATED ASSETS
SECTION 2.01. CONVEYANCE OF 1998 TRANSITION PROPERTY AND RELATED ASSETS.
In consideration of the Note Issuer's delivery of $864,000,000 to or upon the
order of the Grantee, the Grantee irrevocably sells, transfers, assigns, sets
over and otherwise conveys to the Note Issuer, without recourse (subject to the
obligations herein), all of its right, title and interest in, to and under:
2
<PAGE>
(a) the 1998 Transition Property (such sale, transfer, assignment, set
over and conveyance of the 1998 Transition Property includes, to the fullest
extent permitted by the Funding Law, the assignment of all revenues,
collections, claims, rights, payments, money or proceeds of or arising from the
IFCs pursuant to the 1998 Funding Order and the 1998 Initial Tariff), including,
without limitation, any Allocable IFC Revenue Amounts; and
(b) the Related Assets.
Such sale, transfer, assignment, set over and conveyance is expressly
stated to be a sale and absolute transfer, and pursuant to Section 18-108 of the
Funding Law, shall be treated as an absolute transfer (as in a true sale), and
not as a pledge or other financing, of the 1998 Transition Property. The
previous sentence is the express statement referred to in Section 18-108 of the
Funding Law. To the extent that, notwithstanding the Funding Law, the
Application and the 1998 Funding Order, the foregoing sale, transfer,
assignment, set over and conveyance is held not to be an absolute transfer (as
in a true sale) as contemplated under Section 18-108 of the Funding Law, then
such sale, transfer, assignment, set over and conveyance shall be treated as a
pledge of the 1998 Transition Property and the Grantee shall be deemed to have
granted a security interest to the Note Issuer in the 1998 Transition Property.
The Grantee takes the position that it has no rights in the 1998 Transition
Property to which such a security interest could attach because it has sold,
transferred, assigned, set over or otherwise conveyed all rights in, to and
under the 1998 Transition Property to the Note Issuer pursuant to Section 18-108
of the Funding Law.
3
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF GRANTEE
The Grantee makes the following representations and warranties, as of the
Closing Date, on which the Note Issuer has relied in acquiring the 1998
Transition Property and Related Assets. These representations and warranties
shall survive the sale, transfer, assignment, set over and conveyance of the
1998 Transition Property and Related Assets to the Note Issuer, the pledge
thereof to the Indenture Trustee pursuant to the Indenture and the issuance of
the Notes.
SECTION 3.01. ORGANIZATION AND GOOD STANDING. The Grantee is duly
organized and validly existing as a limited liability company in good standing
under the laws of the State of Delaware, with the power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is presently conducted, and had at all relevant times, and
has, the requisite power, authority and legal right to own the 1998 Transition
Property and Related Assets.
SECTION 3.02. DUE QUALIFICATION. The Grantee is duly qualified to do
business as a limited liability company in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business shall require such
qualifications, licenses or approvals (except where the failure to so qualify
would not be reasonably likely to have a material adverse effect on the
Grantee's business, operations, assets, revenues or properties).
SECTION 3.03. POWER AND AUTHORITY. The Grantee has the requisite power
and authority to execute and deliver this Agreement and to carry out its terms;
the Grantee has full power and authority to sell and assign the 1998 Transition
Property and Related Assets to be sold and
4
<PAGE>
assigned to the Note Issuer and the Grantee has duly authorized such sale and
assignment to the Note Issuer by all necessary company action; and the
execution, delivery and performance of this Agreement have been duly
authorized by the Grantee by all necessary company action.
SECTION 3.04. BINDING OBLIGATION. This Agreement constitutes a legal,
valid and binding obligation of the Grantee enforceable against the Grantee in
accordance with its terms, subject to applicable insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws relating to or affecting
creditors' rights generally from time to time in effect and to general
principles of equity (including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing), regardless of whether considered
in a proceeding in equity or at law.
SECTION 3.05. NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof do not
(i) conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time) a default under, the
Operating Agreement or Certificate of Formation of the Grantee, or any
indenture, agreement or other instrument to which the Grantee is a party or by
which it shall be bound; (ii) result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any such indenture,
agreement or other instrument; or (iii) violate any law or any order, rule or
regulation applicable to the Grantee of any court or of any Federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Grantee or its properties.
SECTION 3.06. NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the Grantee's knowledge, threatened, before any court, Federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Grantee
5
<PAGE>
or its properties involving or relating to the Grantee or the Note Issuer or,
to the Grantee's knowledge, any other Person: (i) asserting the invalidity of
the Funding Law, this Agreement, any of the other Basic Documents or the
Notes, (ii) seeking to prevent the issuance of the Notes or the consummation
of any of the transactions contemplated by this Agreement or any of the other
Basic Documents, (iii) seeking any determination or ruling that could
reasonably be expected to materially and adversely affect the Grantee's
performance of its obligations under, or the validity or enforceability of
this Agreement, any of the other Basic Documents or the Notes, or (iv) which
could reasonably be expected to adversely affect the Federal or state income
tax attributes of the Notes.
SECTION 3.07. APPROVALS. No approval, authorization, consent, order or
other action of or filing with, any court, Federal or state regulatory body,
administrative agency or other governmental instrumentality is required in
connection with the Grantee's execution and delivery of this Agreement, the
Grantee's performance of the transactions contemplated hereby or the Grantee's
fulfillment of the terms hereof except those that have been obtained or made.
SECTION 3.08. THE 1998 TRANSITION PROPERTY AND RELATED ASSETS.
(a) INFORMATION. At the Closing Date, all information provided by the
Grantee to the Note Issuer with respect to the 1998 Transition Property
(including the 1998 Funding Order and the 1998 Initial Tariff) and the Related
Assets is correct in all material respects.
(b) TITLE. It is the intention of the parties hereto that the transfer
and assignment herein contemplated constitute a sale and absolute transfer of
the 1998 Transition Property and Related Assets from the Grantee to the Note
Issuer and that no beneficial interest in or title to the 1998 Transition
Property and Related Assets shall be part of the Grantee's estate in the event
of the filing of a bankruptcy petition by or against the Grantee under any
bankruptcy law. No portion of the 1998
6
<PAGE>
Transition Property and Related Assets has been sold, transferred, assigned,
pledged or otherwise conveyed by the Grantee to any Person other than the
Note Issuer. At the Closing Date, immediately prior to the sale hereunder,
the Grantee owns the 1998 Transition Property and Related Assets, free and
clear of all Liens and rights of any other Person, and no offsets, defenses
or counterclaims exist or have been asserted with respect thereto.
(c) TRANSFER FILINGS. At the Closing Date, the 1998 Transition Property
and Related Assets have been validly transferred, assigned and sold from the
Grantee to the Note Issuer, the Note Issuer owns all the 1998 Transition
Property and Related Assets, free and clear of all Liens and rights of any other
Person (other than Liens created pursuant to the Indenture), and all filings to
be made by the Grantee (including filings with the ICC under the Funding Law)
necessary in any jurisdiction to give the Note Issuer a first priority perfected
ownership interest in the 1998 Transition Property and Related Assets have been
made. No further action is required under Illinois law to maintain such first
priority perfected ownership interest in the 1998 Transition Property. No
further action, other than any filings or other steps required to be taken with
respect to proceeds or on account of events occurring after the date hereof by
Sections 9-103, 9-304, 9-306, 9-402(7) or 9-403(2)- (3) of the UCC, is required
to maintain such first priority perfected ownership interest in the Related
Assets.
(d) STATE PLEDGE. The State of Illinois has agreed with the Holders,
pursuant to Section 18-105(b) of the Funding Law, as follows:
"(b) The State pledges to and agrees with the holders of any
transitional funding instruments who may enter into contracts with an
electric utility, grantee, assignee or issuer pursuant to this Article
XVIII that the State will not in any way limit, alter, impair or reduce
the value of intangible transition property created by, or instrument
funding charges approved by, a transitional funding order so as to impair
the terms of any contract made by such electric utility, grantee, assignee
or issuer with such holders or in any way impair the
7
<PAGE>
rights and remedies of such holders until the pertinent grantee
instruments or, if the related transitional funding order does not provide
for the issuance of grantee instruments, the pertinent transitional
funding instruments and interest, premium and other costs and charges
related thereto, as the case may be, are fully paid and discharged.
Electric utilities, grantees and issuers are authorized to include
these pledges and agreements of the State in any contract with the
holders of transitional funding instruments or with any assignees
pursuant to this Article XVIII and any assignees are similarly
authorized to include these pledges and agreements of the State
in any contract with any issuer, holder or any other assignee. Nothing in
this Article XVIII shall preclude the State of Illinois from requiring
adjustments as may otherwise be allowed by law to the electric utility's
base rates, transition charges, delivery services charges, or other
charges for tariffed services, so long as any such adjustment does not
directly affect or impair any instrument funding charges previously
authorized by a transitional funding order issued by the [ICC]."
As a result of the foregoing pledge, the State of Illinois may not, except as
provided in the succeeding sentence, in any way reduce, postpone, impair or
terminate the 1998 Transition Property in a manner substantially impairing the
Indenture or the rights and remedies of the Holders (and consequently, may not
revoke, reduce, postpone or terminate the 1998 Funding Order or the rights of
the Holders to receive IFC Payments and all other proceeds of the 1998
Transition Property), until the Notes, together with interest thereon, are fully
paid and discharged. Notwithstanding the immediately preceding sentence, the
State would be allowed to effect a temporary impairment of the Holders' rights
if it could be shown that a temporary impairment was necessary to advance a
significant and legitimate public purpose.
(e) 1998 FUNDING ORDER AND TARIFFS; OTHER APPROVALS. (i) The 1998 Funding
Order pursuant to which the 1998 Transition Property has been created has been
duly entered by the ICC, is valid and binding, is Final and is in full force and
effect; (ii) the 1998 Initial Tariff is in full force and effect and is not
subject to modification by the ICC except as provided under the Funding Law;
(iii) as of the issuance of the Notes, the Notes are entitled to the protections
provided in Section 18-104(c) of the Funding Law and, accordingly, the 1998
Funding Order, the 1998 Transition Property
8
<PAGE>
and the IFCs are not revocable by the ICC; (iv) the ICC may not reduce,
postpone, impair or terminate the 1998 Transition Property, the 1998 Funding
Order or the IFCs; (v) the process by which the 1998 Funding Order was
adopted and approved and the 1998 Initial Tariff was filed, and the 1998
Funding Order and the 1998 Initial Tariff themselves, comply with all
applicable laws, rules and regulations and the ICC may not revoke, amend or
otherwise change the 1998 Initial Tariff in any manner which would defeat the
expectations of the Holders to receive IFC Payments on a timely basis; and
(vi) no other approval, authorization, consent, order or other action of, or
filing with, any court, Federal or state regulatory body, administrative
agency or other governmental instrumentality is required in connection with
the grant of the 1998 Transition Property, except those that have been
obtained or made.
(f) ASSUMPTIONS. At the Closing Date, the assumptions used in calculating
the IFCs are reasonable and made in good faith.
(g) CREATION OF 1998 TRANSITION PROPERTY. Upon the effectiveness of the
1998 Initial Tariff: (i) all of the 1998 Transition Property constitutes a
current property right vested in the Grantee; (ii) the 1998 Transition Property
includes, without limitation, (A) the right, title and interest in and to the
IFCs authorized under the 1998 Funding Order, as adjusted from time to time, (B)
the right, title and interest in and to all revenues, collections, claims,
payments, money or proceeds of or arising from the IFCs set forth in the 1998
Initial Tariff, and (C) all rights to compel Illinois Power, as Servicer (or any
successor), to file for and obtain adjustments to the IFCs pursuant to the 1998
Funding Order; and (iii) the Grantee is entitled to impose and collect the IFCs
described in the 1998 Funding Order and the 1998 Initial Tariff in an aggregate
amount equal to the principal amount of the Notes, all interest thereon, all
amounts required to be deposited in the Reserve Subaccount,
9
<PAGE>
the Overcollateralization Subaccount and the Capital Subaccount, and all
related fees, costs and expenses in respect of the Notes until they have been
paid in full, subject only to the $1.634 billion limitation set forth in the
1998 Funding Order as the maximum dollar amount of 1998 Transition Property
created thereunder.
(h) PROPERTY OF GRANTEE. To the fullest extent permitted by the Funding
Law and all other applicable law, the 1998 Transition Property and the right to
impose and collect IFCs contemplated thereunder constitute property rights of
the Grantee and its assigns, including the Note Issuer and its assigns
(including the Indenture Trustee on behalf of the Holders), which property has
been placed beyond the reach of Illinois Power and its creditors, as in a true
sale, and which property rights may not be limited, altered, impaired, reduced
or otherwise terminated by any subsequent actions of Illinois Power or any third
party and which shall, to the full extent permitted by law, be enforceable
against Illinois Power, its successors and assigns, and all other third parties
(including judicial lien creditors) claiming an interest therein by or through
Illinois Power or its successors and assigns.
(i) NATURE OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties set forth in this SECTION 3.08, insofar as they involve conclusions
of law, are made not on the basis that the Grantee purports to be a legal expert
or to be rendering legal advice, but rather to reflect the parties' good faith
understanding of the legal basis on which the parties are entering into this
Agreement and the other Basic Documents and the basis on which the Holders are
purchasing the Notes, and to reflect the parties' agreement that, if such
understanding turns out to be incorrect or inaccurate, the Grantee will be
obligated to indemnify the Note Issuer and its permitted assigns, and that the
Note Issuer and its permitted assigns will be entitled to enforce any rights and
remedies
10
<PAGE>
under the documents, on account of such inaccuracy to the same extent as if
the Grantee had breached any other representations or warranties hereunder.
ARTICLE IV
COVENANTS OF THE GRANTEE
SECTION 4.01. CORPORATE EXISTENCE. So long as any of the Notes are
outstanding, the Grantee (a) will keep in full force and effect its existence,
rights and franchises as a limited liability company under the laws of the State
of Delaware (unless it becomes, or any successor Grantee hereunder is or
becomes, organized under the laws of any other State or of the United States of
America, in which case the Grantee will keep in full effect its existence,
rights and franchises under the laws of such other jurisdiction), (b) will
obtain and preserve its qualification to do business, in each case to the extent
that in each such jurisdiction such existence or qualification is or shall be
necessary to protect the validity and enforceability of this Agreement, the
Basic Documents to which the Grantee is a party and each other instrument or
agreement necessary or appropriate to the proper administration of this
Agreement and the transactions contemplated hereby and (c) at all times
hereafter, the Grantee will not elect nor cause nor permit the Note Issuer to
elect to be classified as an association taxable as a corporation for federal
income tax purposes.
SECTION 4.02. NO LIENS. Except for the conveyances hereunder, the Grantee
will not sell, pledge, assign or transfer to any other Person, or grant, create,
incur, assume, suffer to exist or otherwise assert any Lien on, any of the 1998
Transition Property or Related Assets, or any interest therein, and the Grantee
shall defend the right, title and interest of the Note Issuer and the Indenture
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Trustee in, to and under the 1998 Transition Property and Related Assets,
against all claims of third parties claiming through or under the Grantee.
SECTION 4.03. DELIVERY OF COLLECTIONS. If the Grantee receives
collections in respect of the IFCs or the proceeds thereof, or in replacement
therefor, including, without limitation, any Allocable IFC Revenue Amounts, the
Grantee agrees to hold such payments in trust for the Servicer and to pay the
Servicer all payments received by the Grantee in respect thereof as soon as
practicable after receipt thereof by the Grantee, but in no event later than two
Business Days after such receipt.
SECTION 4.04. NOTICE OF LIENS. The Grantee shall notify the Note Issuer
and the Indenture Trustee in writing promptly after becoming aware of any Lien
on any of the 1998 Transition Property or Related Assets other than the
conveyances hereunder and under the Indenture.
SECTION 4.05. COMPLIANCE WITH LAW. The Grantee shall comply with its
organizational or governing documents and all laws, treaties, rules, regulations
and determinations of any governmental instrumentality applicable to it, to the
extent that failure to so comply would not materially adversely affect the Note
Issuer's or the Indenture Trustee's interests in the 1998 Transition Property or
Related Assets or under any of the Basic Documents or the Grantee's performance
of its obligations hereunder or under any of the other Basic Documents to which
it is party.
SECTION 4.06. COVENANTS RELATED TO THE 1998 TRANSITION PROPERTY, RELATED
ASSETS AND THE NOTES.
(a) So long as any of the Notes are outstanding, the Grantee shall
indicate in its financial statements that the Note Issuer and not the Grantee
owns the 1998 Transition Property and the Related Assets.
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(b) So long as any of the Notes are outstanding, the Grantee shall not own
or purchase any Notes.
(c) The Grantee agrees that upon its sale of the 1998 Transition Property
and Related Assets to the Note Issuer pursuant to this Agreement, (i) to the
fullest extent permitted by law, including applicable ICC Regulations, the Note
Issuer shall have all of the rights of the owner of the 1998 Transition Property
(including all of the rights originally held by the Grantee with respect to the
1998 Transition Property and Related Assets), including the right (subject to
the terms of the Servicing Agreement) to exercise any and all rights and
remedies to collect any amounts payable by any Customer or third party
collection agent, including any ARES, in respect of the 1998 Transition
Property, notwithstanding any objection or direction to the contrary by the
Grantee and (ii) any payment by any Customer or third party collection agent,
including any ARES, to the Note Issuer (or to the Servicer for the benefit of
the Note Issuer) shall discharge such Customer's or third party's obligations in
respect of the 1998 Transition Property to the extent of such payment,
notwithstanding any objection or direction to the contrary by the Grantee.
(d) So long as any of the Notes are outstanding, (i) except with respect
to federal and other applicable taxes, the Grantee shall not make any statement
or reference in respect of the 1998 Transition Property or the Related Assets
that is inconsistent with the ownership interest of the Note Issuer therein, and
(ii) the Grantee shall not take any action in respect of the 1998 Transition
Property or the Related Assets except as otherwise contemplated by the Basic
Documents.
SECTION 4.07. PROTECTION OF TITLE. The Grantee shall execute and file
such filings, including filings with the ICC pursuant to the Funding Law, and
cause to be executed and filed such filings, all in such manner and in such
places as may be required by law fully to preserve, maintain,
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and protect the interests of the Note Issuer in the 1998 Transition Property
and Related Assets, including all filings required under the Funding Law
relating to the transfer of the ownership or security interest in the 1998
Transition Property by the Grantee to the Note Issuer. The Grantee shall
deliver (or cause to be delivered) to the Note Issuer file-stamped copies of;
or filing receipts for, any document filed as provided above, promptly
following such filing. The Grantee shall institute any action or proceeding
necessary to compel performance by the ICC or the State of Illinois of any of
their obligations or duties under the Funding Law, the 1998 Funding Order,
the 1998 Initial Tariff or any amendatory tariff filed pursuant to Section
18-104(k) of the Funding Law, and the Grantee agrees to take such legal or
administrative actions, including defending against or instituting and
pursuing legal actions and appearing or testifying at hearings or similar
proceedings, as may be reasonably necessary to protect the Note Issuer and
the Holders from claims, state actions or other actions or proceedings of
third parties which, if successfully pursued, would result in a breach of any
representation set forth in Article III. The costs of any such actions or
proceedings will be payable by the Grantee. The Grantee designates the Note
Issuer as its agent and attorney-in-fact to execute any filings with the ICC,
financing statements, continuation statements or other instruments required
by the Note Issuer pursuant to this Section, it being understood that the
Note Issuer shall have no obligation to execute any such instruments.
SECTION 4.08. NONPETITION COVENANTS. Notwithstanding any prior
termination of this Agreement or the Indenture, but subject to the ICC's right
to order the sequestration and payment of revenues arising with respect to the
1998 Transition Property notwithstanding any bankruptcy, reorganization or other
insolvency proceedings with respect to Illinois Power, the Grantee, the Note
Issuer or any other grantee or assignee of the 1998 Transition Property pursuant
to Section 18-
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107(c)(4) of the Funding Law, the Grantee shall not, prior to the date which
is one year and one day after the termination of the Indenture, acquiesce,
petition or otherwise invoke or cause or join with any other Person to invoke
the process of any court or governmental authority for the purpose of
commencing or sustaining a case against the Note Issuer under any Federal or
state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar
official of or for the Note Issuer or any substantial part of the property of
the Note Issuer, or ordering the winding up or liquidation of the affairs of
the Note Issuer.
SECTION 4.09. TAXES. So long as any of the Notes are outstanding, the
Grantee shall, and shall cause each of its subsidiaries to, pay all material
taxes, assessments and governmental charges imposed upon it or any of its
properties or assets or with respect to any of its franchises, business, income
or property before any penalty accrues thereon if the failure to pay any such
taxes, assessments and governmental charges would, after any applicable grace
periods, notices or other similar requirements, result in a lien on the 1998
Transition Property or Related Assets; provided that no such tax need be paid if
the Grantee or one of its subsidiaries is contesting the same in good faith by
appropriate proceedings promptly instituted and diligently conducted and if the
Grantee or such subsidiary has established appropriate reserves as shall be
required in conformity with generally accepted accounting principles.
SECTION 4.10. PERFORMANCE OF OBLIGATIONS; SERVICING.
(a) The Grantee may contract with other Persons to assist it in performing
its duties under this Agreement, and any performance of such duties by a Person
identified to the Note Issuer in an Officer's Certificate of the Grantee shall
be deemed to be action taken by the Grantee.
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(b) Except as otherwise expressly permitted therein, the Grantee shall not
waive, amend, modify, supplement or terminate any Basic Document or any
provision thereof without the written consent of the Note Issuer (which consent
shall not be withheld if the Indenture Trustee shall have consented thereto).
(c) Upon any termination of the Servicer's rights and powers pursuant to
the Servicing Agreement, the Note Issuer shall promptly notify the Grantee. As
soon as a Successor Servicer is appointed, the Note Issuer shall notify the
Grantee of such appointment, specifying in such notice the name and address of
such Successor Servicer.
(d) Without derogating from the absolute nature of the assignment granted
to the Note Issuer under this Agreement or the rights of the Note Issuer
hereunder, the Grantee will not, without the prior written consent of the Note
Issuer, amend, modify, waive, supplement, terminate or surrender, or agree to
any amendment, modification, supplement, termination, waiver or surrender of;
the terms of any Note Collateral or the Basic Documents, or waive timely
performance or observance by Illinois Power or the Servicer under the Grant
Agreement or the Servicing Agreement, respectively. If any such amendment,
modification, supplement or waiver shall be so consented to by the Note Issuer
and the Note Issuer shall so request, the Grantee shall execute and deliver, in
its own name and at its own expense, such agreements, instruments, consents and
other documents as shall be necessary or appropriate in the circumstances.
(e) The Grantee shall make all filings required under the Funding Law
relating to the transfer of the ownership or security interest in the 1998
Transition Property other than those required to be made by Illinois Power
pursuant to the Basic Documents.
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SECTION 4.11. ADDITIONAL NEGATIVE COVENANTS. So long as any Notes are
Outstanding, the Grantee shall not:
(a) except as permitted by Section 5.02, sell, transfer, exchange or
otherwise dispose of any of its properties or assets;
(b) assert any claim against the Note Issuer by reason of the payment of
the taxes levied or assessed upon any part of the 1998 Transition Property or
the Related Assets;
(c) except as permitted by Section 5.02, terminate its existence or
dissolve or liquidate in whole or in part; or
(d) take any action that would be inconsistent with the Note Issuer's
absolute and first priority ownership interest in the 1998 Transition Property
and the Related Assets.
SECTION 4.12. NO OTHER BUSINESS. The Grantee shall not engage in any
business other than acquiring, owning, financing, transferring, assigning and
otherwise managing the 1998 Transition Property and Related Assets, and any
Subsequent Intangible Transition Property and Subsequent Related Assets, in the
manner contemplated by this Agreement and the Basic Documents (or in a similar
manner, in the case of Subsequent Transition Property and Subsequent Related
Assets) and activities incidental thereto.
SECTION 4.13. NO BORROWING. The Grantee shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness.
SECTION 4.14. GUARANTEES LOANS, ADVANCES AND OTHER LIABILITIES. Except as
otherwise contemplated by the Grant Agreement, the Administration Agreement, the
Servicing Agreement or this Agreement, the Grantee shall not make any loan or
advance or credit to, or guarantee (directly or indirectly or by an instrument
having the effect of assuring another's payment
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or performance on any obligation or capability of so doing or otherwise),
endorse or otherwise become contingently liable, directly or indirectly, in
connection with the obligations, stocks or dividends of, or own, purchase,
repurchase or acquire (or agree contingently to do so) any stock,
obligations, assets or securities of; or any other interest in, or make any
capital contribution to, any other Person.
SECTION 4.15. CAPITAL EXPENDITURES. Other than expenditures made out of
available funds in an aggregate amount not to exceed $25,000 in any calendar
year, the Grantee shall not make any expenditure (by long- term or operating
lease or otherwise) for capital assets (either realty or personalty).
SECTION 4.16. NOTICE OF DEFAULTS. The Grantee shall promptly notify the
Note Issuer, in writing, of each default under the Indenture and each material
default on the part of Illinois Power or the Servicer of their respective
obligations under the Grant Agreement or the Servicing Agreement.
SECTION 4.17. SEPARATE EXISTENCE. The Grantee shall:
(i) Maintain with commercial banking institutions its own deposit
account or accounts separate from those of any Affiliate of the Grantee.
The Grantee's funds will not be diverted to any other Person or for other
than the Grantee's use, and, except as may be expressly permitted by this
Agreement or the Servicing Agreement, the funds of the Grantee shall not be
commingled with those of any Affiliate of the Grantee.
(ii) Ensure that, to the extent that it shares the same officers or
other employees as any of its members or Affiliates, the salaries of and
the expenses related to providing benefits to such officers and other
employees shall be fairly allocated among such entities,
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and each such entity shall bear its fair share of the salary and benefit
costs associated with all such common officers and employees.
(iii) Ensure that, to the extent that it jointly contracts with any
of its members or Affiliates to do business with vendors or service
providers or to share overhead expenses, the costs incurred in so doing
shall be allocated fairly among such entities, and each such entity shall
bear its fair share of such costs. To the extent that the Grantee
contracts or does business with vendors or service providers where the
goods and services provided are partially for the benefit of any other
Person, the costs incurred in so doing shall be fairly allocated to or
among such entities for whose benefit the goods and services are provided,
and each such entity shall bear its fair share of such costs. All material
transactions between the Grantee and any of its Affiliates shall be only on
an arm's-length basis.
(iv) Maintain a principal executive and administrative office
through which its business is conducted separate from those of its members
and Affiliates. To the extent that the Grantee and any of its members or
Affiliates have offices in contiguous space, there shall be fair and
appropriate allocation of overhead costs among them, and each such entity
shall bear its fair share of such expenses.
(v) Conduct its affairs strictly in accordance with its Operating
Agreement and observe all necessary, appropriate and customary formalities,
including, but not limited to, holding all regular and special members'
meetings, and meetings of the Grantee's management committee, appropriate
to authorize all action on behalf of the Grantee, keeping all resolutions
or consents necessary to authorize actions taken or to be taken,
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and maintaining accurate and separate books, records and accounts,
including, but not limited to, payroll and intercompany transaction
accounts.
(vi) Ensure that its management committee (a) shall not include any
Person who is also a member of the Board of Directors of any of the
Grantee's Affiliates and (b) shall at all times include at least two
Independent Managers (as such term is defined in the Grantee's Operating
Agreement).
(vii) Act solely in its own name and through its own authorized
managers and agents, and no Affiliate of the Grantee shall be appointed to
act as agent of the Grantee, except as expressly contemplated by this
Agreement or the Servicing Agreement.
(viii) Ensure that no Affiliate of the Grantee shall advance funds to
the Grantee, or otherwise guaranty debts of, the Grantee, except as
provided in the Grantee's Operating Agreement; PROVIDED, HOWEVER, that an
Affiliate of the Grantee may provide funds to the Grantee in connection
with capitalization of the Grantee.
(ix) Not enter into any guaranty, or otherwise become liable, with
respect to any obligation of any Affiliate of the Grantee.
SECTION 4.18. FURTHER INSTRUMENTS AND ACTS. Upon request of the Note
Issuer, the Grantee will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Agreement.
SECTION 4.19. SUBSEQUENT TRANSITION PROPERTY.
(a) Notwithstanding any provision hereof to the contrary, the Grantee may
from time to time accept newly-created Subsequent Transition Property pursuant
to a related Subsequent Funding Order and a Subsequent Tariff, subject to the
conditions specified in paragraph (b) below.
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(b) The Grantee shall be permitted to accept Subsequent Transition
Property only upon the satisfaction of each of the following conditions on or
prior to the related Subsequent Creation Date:
(i) Illinois Power shall have provided the Grantee, the Subsequent
Note Issuer, the Indenture Trustee and the Rating Agencies with written
notice, which shall be given not later than 10 days prior to the related
Subsequent Creation Date, specifying the Subsequent Creation Date for such
Subsequent Transition Property and the aggregate amount of the IFCs related
to such Subsequent Transition Property, and shall have provided any
information reasonably requested by any of the foregoing Persons with
respect to the Subsequent Transition Property to be created in favor of the
Grantee.
(ii) Illinois Power and the Grantee shall have delivered to the
Note Issuer a duly executed Subsequent Grant Agreement, and the Grantee
shall have delivered to the Note Issuer a duly executed Subsequent Sale
Agreement;
(iii) as of such Subsequent Creation Date, Illinois Power will not
be insolvent and will not have been made insolvent by such transfer and
Illinois Power will not be aware of any pending insolvency with respect to
itself;
(iv) the Rating Agency Condition shall have been satisfied with
respect to such creation;
(v) Illinois Power shall have delivered to the Grantee, the Note
Issuer, the Indenture Trustee and the Delaware Trustee an opinion of
independent tax counsel and/or a ruling from the IRS (as selected by, and
in form and substance reasonably satisfactory to Illinois Power) to the
effect that for federal income tax purposes (i) the issuance of the
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Transitional Funding Order authorizing the collection of the Instrument
Funding Charges does not result in gross income to Illinois Power, the
Grantee or the Note Issuer, (ii) the assignment of the Intangible
Transition Property to the Note Issuer and the issuance of the Notes does
not result in gross income to Illinois Power, the Grantee or the Note
Issuer, and (iii) the Notes will be obligations of Illinois Power for
federal income tax purposes;
(vi) as of such Subsequent Creation Date, no breach by Illinois
Power of its representations, warranties or covenants in the Grant
Agreement and no Servicer Default shall exist;
(vii) as of such Subsequent Creation Date, the Grantee shall have
sufficient funds available to pay Illinois Power the consideration set
forth in the Subsequent Grant Agreement, and all conditions shall have been
satisfied for the issuance of one or more instruments under the Indenture
in order to provide such funds;
(viii) the Grantee shall have delivered to the Rating Agencies any
Opinions of Counsel requested by the Rating Agencies;
(ix) the Grantee and the Note Issuer shall have taken all actions
required to perfect the ownership interest or security interest (as the
case may be) of the Note Issuer in the Subsequent Transition Property and
Subsequent Related Assets and the proceeds thereof; free and clear of any
Liens; and
(x) the Grantee shall have delivered to the Note Issuer an
Officer's Certificate confirming the satisfaction of each condition
precedent specified in this paragraph (b).
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ARTICLE V
THE GRANTEE
SECTION 5.01. LIABILITY OF GRANTEE; INDEMNITIES.
(a) The Grantee shall be liable in accordance herewith only to the extent
of the obligations specifically undertaken by the Grantee under this Agreement.
(b) The Grantee shall indemnify the Note Issuer, the Indenture Trustee and
the Delaware Trustee, and each of their respective officers, directors,
employees and agents for, and defend and hold harmless each such Person from and
against, any and all taxes (i) that may at any time be imposed on or asserted
against any such Person as a result of the grant of the 1998 Transition Property
to the Grantee, or (ii) that may be imposed on or asserted against any such
Person under existing law as of the Closing Date as a result of the Grantee's
ownership and assignment of the 1998 Transition Property, the Note Issuer's
issuance and sale of the Notes, or the other transactions contemplated herein,
including, in each case, any sales, gross receipt, general corporation, tangible
personal property, privilege or license taxes, but excluding any taxes imposed
as a result of a failure of such Person to withhold or remit taxes imposed with
respect to payments on any Note.
(c) The Grantee shall indemnify the Note Issuer, the Indenture Trustee,
the Delaware Trustee and the Holders and each of their respective officers,
directors, employees and agents for, and defend and hold harmless each such
Person from and against, any and all amounts of principal and interest on the
Notes not paid when due in accordance with their terms and the amount of any
deposits to the Note Issuer required to have been made in accordance with the
terms of the Basic Documents which are not made when so required and any and
all liabilities, obligations, claims, actions, suits, or payments, of any
kind whatsoever that may be imposed on or asserted against any
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such Person, together with any reasonable costs and expenses incurred by such
Person (collectively, "Losses"), as a result of the Grantee's breach of any
of its representations, warranties or covenants contained in this Agreement.
(d) The Grantee shall pay any and all taxes levied or assessed upon all or
any part of the Note Issuer's property or assets based on existing law as of the
Closing Date.
(e) Indemnification under this Section 5.01 shall survive the resignation
or removal of the Indenture Trustee or the Delaware Trustee and the termination
of this Agreement and shall include reasonable fees and expenses of
investigation and litigation (including reasonable attorneys' fees and
expenses).
SECTION 5.02. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, GRANTEE. Any Person (a) into which the Grantee may be merged
or consolidated, (b) which may result from any merger or consolidation to
which the Grantee shall be a party or (c) which may succeed to the properties
and assets of the Grantee substantially as a whole, which Person in any of
the foregoing cases executes an agreement of assumption to perform every
obligation of the Grantee hereunder, shall be the successor to the Grantee
under this Agreement without further act on the part of any of the parties to
this Agreement; PROVIDED, HOWEVER, that (i) immediately after giving effect
to such transaction, no representation or warranty made pursuant to Article
III shall have been breached, (ii) the Grantee shall have delivered to the
Note Issuer and the Indenture Trustee an Officers' Certificate and an Opinion
of Counsel each stating that such consolidation, merger or succession and
such agreement of assumption comply with this Section and that all conditions
precedent, if any, provided for in this Agreement relating to such
transaction have been complied with, (iii) the Grantee shall have delivered
to the Note Issuer and the Indenture Trustee an Opinion
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of Counsel either (A) stating that, in the opinion of such counsel, all
filings to be made by the Grantee, including filings with the ICC pursuant to
the Funding Law, have been executed and filed that are necessary to fully
preserve and protect the interest of the Note Issuer in the 1998 Transition
Property and Related Assets and reciting the details of such filings, or (B)
stating that, in the opinion of such counsel, no such action shall be
necessary to preserve and protect such interests (iv) the Rating Agencies
shall have received prior written notice of such transaction and (v) Illinois
Power shall have delivered to the Grantee, the Note Issuer, the Delaware
Trustee and the Indenture Trustee an opinion of independent tax counsel (as
selected by, and in form and substance reasonably satisfactory to, Illinois
Power, and which may be based on a ruling from the Internal Revenue Service)
to the effect that, for federal income tax purposes, such consolidation or
merger will not result in a material adverse federal income tax consequence
to Illinois Power, the Grantee, the Note Issuer, the Delaware Trustee, the
Indenture Trustee or the then existing Holders. Notwithstanding anything
herein to the contrary, the execution of the foregoing agreement of
assumption and compliance with clauses (i), (ii), (iii), (iv) and (v) above
shall be conditions to the consummation of any transaction referred to in
clauses (a), (b) or (c) above. When any Person acquires the properties and
assets of Illinois Power Securitization Limited Liability Company,
substantially as a whole and becomes the successor to Illinois Power
Securitization Limited Liability Company in accordance with the terms of this
Section 5.02, then upon the satisfaction of all of the other conditions of
this Section 5.02, Illinois Power Securitization Limited Liability Company
shall automatically and without further notice be released from its
obligations hereunder.
SECTION 5.03. LIMITATION ON LIABILITY OF GRANTEE AND OTHERS. The
Grantee and any director or officer or employee or agent of the Grantee may
rely in good faith on the advice of
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counsel or on any document of any kind, PRIMA FACIE properly executed and
submitted by any Person, respecting any matters arising hereunder. Subject to
Section 4.07, the Grantee shall not be under any obligation to appear in,
prosecute or defend any legal action that shall not be incidental to its
obligations under this Agreement, and that in its opinion may involve it in
any expense or liability.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.01. AMENDMENT. The Agreement may be amended by the Grantee
and the Note Issuer, with prior written notice given to the Rating Agencies
and the prior written consent of the Indenture Trustee, but without the
consent of any of the Holders, to cure any ambiguity, to correct or
supplement any provisions in this Agreement or for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
in this Agreement or of modifying in any manner the rights of the Holders;
PROVIDED, HOWEVER, that such action shall not, as evidenced by an Officer's
Certificate delivered to the Note Issuer and the Indenture Trustee, adversely
affect in any material respect the interests of any Holder. This Agreement
may also be amended from time to time by the Grantee and the Note Issuer,
with prior written notice given to the Rating Agencies and the prior written
consent of the Indenture Trustee and Holders holding not less than a majority
of the Outstanding Amount of the Notes of all Series affected thereby, for
the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Holders; PROVIDED, HOWEVER, that no such amendment
shall (a) increase or reduce in any manner the amount of; or accelerate or
delay the timing of; IFC
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Collections or (b) reduce the aforesaid percentage of the Outstanding Amount
of the Notes, the Holders of which are required to consent to any such
amendment, without the consent of the Holders of all the outstanding Notes.
Promptly after the execution of any such amendment or consent, the Note
Issuer shall furnish a copy of such amendment or consent to the Indenture
Trustee and each of the Rating Agencies.
It shall not be necessary for the consent of Holders pursuant to this
Section to approve the particular form of any proposed amendment or consent, but
it shall be sufficient if such consent shall approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the Indenture
Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating
that the execution of such amendment is authorized or permitted by this
Agreement. The Indenture Trustee may, but shall not be obligated to, enter into
any such amendment which affects the Indenture Trustee's own rights, duties or
immunities under this Agreement or otherwise.
SECTION 6.02. NOTICES. All demands, notices and communications upon or
to the Grantee, the Note Issuer, the Indenture Trustee or the Rating Agencies
under this Agreement shall be in writing, personally delivered, mailed or
sent by telecopy or other similar form of rapid transmission, and shall be
deemed to have been duly given upon receipt (a) in the case of the Grantee,
Illinois Power Securitization Limited Liability Company, c/o Illinois Power
Company, 500 South 27th Street, Decatur, Illinois 62525; (b) in the case of
the Note Issuer, to Illinois Power Special Purpose Trust, c/o First Union
Trust Company, National Association, One Rodney Square, 920 King Street, 1st
Floor, Wilmington, Delaware 19801, Attention: Corporate Trust Administration,
with a copy to Richards, Layton & Finger, Attention: Doneene Damon, (c) in
the case of the
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Indenture Trustee, at the Corporate Trust Office; (d) in the case of Moody's,
to Moody's Investors Service, Inc., ABS Monitoring Department, 99 Church
Street, New York, New York 10007; (e) in the case of Standard & Poor's, to
Standard & Poor's Corporation, 26 Broadway (10th Floor), New York, New York
10004, Attention: ABS Surveillance; (f) in the case of Fitch IBCA, to Fitch
IBCA, Inc., One State Street Plaza, New York, New York 10004, Attention: ABS
Surveillance; or (g) in the case of Duff & Phelps, to Duff & Phelps Rating
Co., 17 State Street, 12th Floor, New York, New York 10004, Attention of
Asset Backed Monitoring Group; or as to each of the foregoing, at such other
address as shall be designated by written notice to the other parties.
SECTION 6.03. ASSIGNMENT. Notwithstanding anything to the contrary
contained herein, except as provided in Section 5.02, this Agreement may not be
assigned by the Grantee.
SECTION 6.04. LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of the Grantee, the Note Issuer, the
Indenture Trustee, the Delaware Trustee and the Holders, and nothing in this
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the 1998 Transition
Property or Related Assets or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.
SECTION 6.05. SEVERABILITY. Any provision of this Agreement that is
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.
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SECTION 6.06. SEPARATE COUNTERPARTS. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 6.07. HEADINGS. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 6.08. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of Illinois, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 6.09. ASSIGNMENT TO INDENTURE TRUSTEE. The Grantee acknowledges
and consents to any transfer, pledge, assignment and grant of a security
interest by the Note Issuer to the Indenture Trustee pursuant to the Indenture
for the benefit of the Holders of all right, title and interest of the Note
Issuer in, to and under the 1998 Transition Property and Related Assets and the
proceeds thereof and the assignment of any or all of the Note Issuer's rights
and obligations hereunder to the Indenture Trustee.
SECTION 6.10. LIMITATION OF LIABILITY. It is expressly understood and
agreed by the parties hereto that (a) this Agreement is executed and
delivered by First Union Trust Company, National Association ("First Union")
not individually or personally but solely as Delaware Trustee on behalf of
the Note Issuer, in the exercise of the powers and authority conferred and
vested in it, (b) the representations, undertakings and agreements herein
made by the Delaware Trustee on behalf of the Note Issuer are made and
intended not as personal representations, undertakings and
29
<PAGE>
agreements by First Union are made and intended for the purpose of binding
only the Note Issuer, (c) nothing herein contained shall be construed as
creating any liability on First Union individually or personally, to perform
any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties who are signatories
to this Agreement and by any Person claiming by, through or under such
parties and (d) under no circumstances shall First Union be personally liable
for the payment of any indebtedness or expense of the Note Issuer or be
personally liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Note Issuer
under this Agreement.
SECTION 6.11. LIMITATION OF LIABILITY. It is expressly understood and
agreed by the parties hereto that (a) this Agreement is executed and delivered
by Harris Trust and Savings Bank, not individually or personally but solely as
Indenture Trustee, in the exercise of the powers and authority conferred and
vested in it, and (b) nothing herein contained shall be construed as creating
any liability on Harris Trust and Savings Bank, individually or personally, to
perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties who are signatories to
this Agreement and by any person claiming by, through or under such parties.
SECTION 6.12. HOLDERS AS THIRD-PARTY BENEFICIARIES. The Grantee and
the Note Issuer agree that the Holders and the Indenture Trustee are express
third-party beneficiaries of the provisions of this Agreement and that the
Indenture Trustee, on behalf of the Holders, shall have the right to enforce
the terms hereof as provided in Section 6.09 hereof. The Grantee will take
all appropriate actions to perfect and maintain the perfection of the
Grantee's and the Note Issuer's ownership interest in any of the 1998
Transition Property and to perfect and maintain the perfection
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<PAGE>
of the Indenture Trustee's security interest in such 1998 Transition Property
and all other Note Collateral.
SECTION 6.13. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. In addition
to the survival of representations and warranties as set forth in Article
III, (a) the agreements, representations warranties, indemnities and other
statements of the Grantee set forth in or made pursuant to this Agreement
will remain in full force and effect and will survive the grant of the 1998
Transition Property and the issuance and delivery of the Notes and (b) to the
fullest extent permitted by applicable law, the provisions of Articles III,
IV and V hereof shall survive the termination and cancellation or invalidity
of this Agreement.
31
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
ILLINOIS POWER SECURITIZATION LIMITED
LIABILITY COMPANY, Grantee
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
ILLINOIS POWER SPECIAL PURPOSE TRUST, Note
Issuer
By First Union Trust Company, National
Association, not in its individual capacity
but solely as Delaware Trustee
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Acknowledged and accepted:
HARRIS TRUST AND SAVINGS BANK,
not in its individual capacity
but solely as
Indenture Trustee
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
EXHIBIT 10.2
FORM OF GRANT AGREEMENT
- ------------------------------------------------------------------------------
AGREEMENT RELATING TO GRANT OF INTANGIBLE TRANSITION PROPERTY
between
ILLINOIS POWER COMPANY
and
ILLINOIS POWER SECURITIZATION LIMITED LIABILITY COMPANY
Dated as of December ___, 1998
- ------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE I
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . .2
SECTION 1.02. Other Definitional Provisions . . . . . . . . . . . . . . .2
ARTICLE II
Grant of Transition Property . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.01. Grant of Transition Property. . . . . . . . . . . . . . . .3
ARTICLE III
Representations and Warranties of Illinois Power. . . . . . . . . . . . . . . .4
SECTION 3.01. Organization and Good Standing. . . . . . . . . . . . . . .5
SECTION 3.02. Due Qualification . . . . . . . . . . . . . . . . . . . . .5
SECTION 3.03. Power and Authority . . . . . . . . . . . . . . . . . . . .5
SECTION 3.04. Binding Obligation. . . . . . . . . . . . . . . . . . . . .5
SECTION 3.05. No Violation. . . . . . . . . . . . . . . . . . . . . . . .6
SECTION 3.06. No Proceedings. . . . . . . . . . . . . . . . . . . . . . .6
SECTION 3.07. Approvals . . . . . . . . . . . . . . . . . . . . . . . . .7
SECTION 3.08. The 1998 Transition Property. . . . . . . . . . . . . . . .7
ARTICLE IV
Covenants of Illinois Power . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.01. Corporate Existence . . . . . . . . . . . . . . . . . . . 12
SECTION 4.02. No Liens. . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.03. Delivery of Collections . . . . . . . . . . . . . . . . . 13
SECTION 4.04. Notice of Liens . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.05. Compliance with Law . . . . . . . . . . . . . . . . . . . 14
SECTION 4.06. Covenants Related to the 1998 Transition Property
and the Notes . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.07. Protection of Title . . . . . . . . . . . . . . . . . . . 16
SECTION 4.08. Nonpetition Covenants . . . . . . . . . . . . . . . . . . 17
SECTION 4.09. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 4.10. Contracts for Non-Tariffed Services . . . . . . . . . . . 18
SECTION 4.11. Preservation of Right of Noteholders to Receive
Payment . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE V
Illinois Power. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 5.01. Liability of Illinois Power; Indemnities. . . . . . . . . 19
SECTION 5.02. Merger or Consolidation of or Assumption of the
Obligations of Illinois Power . . . . . . . . . . . . . . 21
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 5.03. Limitation on Liability of Illinois Power and Others. . . 22
ARTICLE VI
Miscellaneous Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 6.01. Amendment . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 6.02. Notices.. . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 6.03. Assignment. . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 6.04. Limitations on Rights of Others . . . . . . . . . . . . . 25
SECTION 6.05. Severability. . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 6.06. Separate Counterparts . . . . . . . . . . . . . . . . . . 25
SECTION 6.07. Headings. . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 6.08. Governing Law . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 6.09. Assignments to Note Issuer and Indenture Trustee. . . . . 26
SECTION 6.10. Holders as Third-Party Beneficiaries. . . . . . . . . . . 26
SECTION 6.11. Representations and Indemnities to Survive. . . . . . . . 27
</TABLE>
ii
<PAGE>
AGREEMENT RELATING TO GRANT OF INTANGIBLE TRANSITION PROPERTY (as the same
may be hereafter amended, supplemented or otherwise modified from time to time,
this "Agreement") dated as of December __, 1998, between ILLINOIS POWER COMPANY,
an Illinois corporation ("Illinois Power"), and ILLINOIS POWER SECURITIZATION
LIMITED LIABILITY COMPANY, a Delaware limited liability company (the "Grantee").
WHEREAS, Illinois Power filed the Application with the ICC pursuant to
Section 18-103 of the Funding Law requesting the issuance of a transitional
funding order;
WHEREAS, Illinois Power requested in the Application that the transitional
funding order (i) establish, create and grant rights, in favor of the Grantee,
in and to "intangible transition property" (as defined in Section 18-102 of the
Funding Law) in the aggregate amount of $1,634,000,000; and (ii) establish and
create "instrument funding charges" as defined in Section 18-102 of the Funding
Law, granting the right to impose and receive certain non-bypassable charges
expressed in cents per kilowatt hour from and after the effective date of the
associated tariff;
WHEREAS, the ICC issued the 1998 Funding Order on September 10, 1998, which
created and established the intangible transition property requested by Illinois
Power in the Application;
WHEREAS, the 1998 Funding Order granted to and vested in the Grantee, as
current and original property rights, and not by assignment from Illinois Power,
all right, title and interest to impose and receive the IFCs authorized by and
under the 1998 Funding Order and all related revenues, collections, claims,
payments, money or proceeds thereof, including all right, title and interest of
the Grantee in, to and under the 1998 Funding Order; and
WHEREAS, the Grantee has agreed (i) to transfer the 1998 Transition
Property to the Note Issuer pursuant to the Sale Agreement, and (ii) to pay
Illinois Power the net proceeds received by the Grantee from the Note Issuer in
connection with such transfer;
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. Capitalized terms used herein and not
otherwise defined herein have the meanings assigned to them in that certain
Indenture (including Appendix A thereto) dated as of the date hereof, between
Illinois Power Special Purpose Trust, as the Note Issuer, and Harris Trust and
Savings Bank, as the Indenture Trustee, as the same may be amended, supplemented
or otherwise modified from time to time.
SECTION 1.02. OTHER DEFINITIONAL PROVISIONS.
(a) "AGREEMENT" shall have the meaning set forth in the preamble hereto.
(b) Non-capitalized terms used herein which are defined in the Public
Utilities Act shall, as the context requires, have the meanings assigned to such
terms in the Public Utilities Act, but without giving effect to amendments to
the Public Utilities Act after the date hereof which have a material adverse
effect on the Note Issuer or the Holders.
(c) All terms defined in this Agreement shall have the defined meaning
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(d) The words "hereof" "herein," "hereunder" and words of similar import,
when used in this Agreement, shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Section, Schedule and Exhibit
references contained in this Agreement are references to
2
<PAGE>
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation".
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter forms of such terms.
ARTICLE II
GRANT OF TRANSITION PROPERTY
SECTION 2.01. GRANT OF TRANSITION PROPERTY. In consideration of Illinois
Power's actions in requesting that the 1998 Transition Property be created and
vested in the Grantee, the Grantee agrees to remit to Illinois Power the net
proceeds remitted to it by the Note Issuer from the sale of the Notes. To the
extent that, notwithstanding the Funding Law, the Application and the 1998
Funding Order, applicable law provides that Illinois Power has any interest in
the 1998 Transition Property or any part thereof, Illinois Power hereby,
effective upon the effectiveness of the 1998 Initial Tariff, sells, transfers,
assigns, sets over and otherwise conveys to the Grantee without recourse
(subject to the obligations herein) all of Illinois Power's right, title and
interest, if any, in, to and under the 1998 Transition Property, whether such
1998 Transition Property is fixed, contingent, liquidated, unliquidated,
material or immaterial and such sale, transfer, assignment, set over and
conveyance shall include, to the fullest extent permitted by the Funding Law,
the assignment of all revenues, collections, claims, rights, payments, money or
proceeds of or arising from the IFCs pursuant to the 1998 Funding Order and the
1998 Initial Tariff, including, without limitation, any Allocable IFC Revenue
Amounts). Such sale, transfer, assignment, set over and
3
<PAGE>
conveyance by Illinois Power is expressly stated to be a present absolute
transfer, and pursuant to Section 18-108 of the Funding Law, shall be treated
as a present absolute transfer (as in a true sale), and not as a pledge or
other financing, of the 1998 Transition Property. The previous sentence is
the express statement referred to in Section 18-108 of the Funding Law. To
the extent that, notwithstanding the Funding Law, the Application and the
1998 Funding Order, Illinois Power is deemed to have any interest in the 1998
Transition Property or any part thereof under applicable law, and if the
foregoing sale, transfer, assignment, set over and conveyance is held not to
be an absolute transfer (as in a true sale) as contemplated under Section
18-108 of the Funding Law, then such sale, transfer, assignment, set over and
conveyance shall be treated as a pledge of the 1998 Transition Property and
Illinois Power shall be deemed to have granted a security interest to the
Grantee in the 1998 Transition Property and the proceeds thereof. Illinois
Power takes the position that it has no rights in the 1998 Transition
Property to which such a security interest could attach.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ILLINOIS POWER
Illinois Power makes the following representations and warranties, as of
the Closing Date, on which the Grantee has relied in selling the 1998 Transition
Property to the Note Issuer. These representations and warranties shall survive
(i) the grant of the 1998 Transition Property to the Grantee pursuant to the
1998 Funding Order and the 1998 Initial Tariff, (ii) to the extent that Illinois
Power has any interest in the 1998 Transition Property or any part thereof, the
sale, transfer, assignment, set over and conveyance by Illinois Power
contemplated hereby, (iii) the sale, transfer, assignment, set over and
conveyance of the 1998 Transition Property and Related Assets to the Note
4
<PAGE>
Issuer and (iv) the pledge thereof to the Indenture Trustee pursuant to the
Indenture and (v) the issuance of the Notes.
SECTION 3.01. ORGANIZATION AND GOOD STANDING. Illinois Power is duly
organized and validly existing as a corporation in good standing under the laws
of the State of Illinois, with the power and authority to own its properties and
to conduct its business as such properties are currently owned and such business
is presently conducted, and had at all relevant times, and has the requisite
power, authority and legal right to request that the ICC issue the 1998 Funding
Order. Illinois Power is engaged in the generation, transmission, distribution
and sale of electricity to the public in Illinois, is a public utility within
the meaning of Section 3-105 of the Public Utilities Act and is an electric
utility within the meaning of the Funding Law and Article XVI of the Public
Utilities Act.
SECTION 3.02. DUE QUALIFICATION. Illinois Power is duly qualified to do
business as a corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or lease of
property or the conduct of its business shall require such qualifications,
licenses or approvals (except where the failure to so qualify would not be
reasonably likely to have a material adverse effect on Illinois Power's
business, operations, assets, revenues or properties).
SECTION 3.03. POWER AND AUTHORITY. Illinois Power has the requisite power
and authority to execute and deliver this Agreement and to carry out its terms;
and the execution, delivery and performance of this Agreement have been duly
authorized by Illinois Power by all necessary corporate action.
SECTION 3.04. BINDING OBLIGATION. This Agreement constitutes a legal,
valid and binding obligation of Illinois Power enforceable against Illinois
Power in accordance with its terms,
5
<PAGE>
subject to applicable insolvency, reorganization, moratorium, fraudulent
transfer and other similar laws relating to or affecting creditors' rights
generally from time to time in effect and to general principles of equity
(including, without limitation, concepts of materiality, reasonableness, good
faith and fair dealing), regardless of whether considered in a proceeding in
equity or at law.
SECTION 3.05. NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof do not
(i) conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time) a default under, the
Articles of Incorporation or by-laws of Illinois Power, or any indenture,
agreement or other instrument to which Illinois Power is a party or by which it
shall be bound; (ii) result in the creation or imposition of any Lien upon any
of its properties pursuant to the terms of any such indenture, agreement or
other instrument; or (iii) violate any law or any order, rule or regulation
applicable to Illinois Power of any court or of any Federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over Illinois Power or its properties.
SECTION 3.06. NO PROCEEDINGS. There are no proceedings or investigations
pending or, to Illinois Power's knowledge, threatened, before any court, Federal
or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over Illinois Power or its properties
involving or relating to Illinois Power or the Grantee or to Illinois Power's
knowledge, any other Person: (i) asserting the invalidity of the Funding Law,
this Agreement, any of the other Basic Documents or the Notes, (ii) seeking to
prevent the grant of the 1998 Transition Property to the Grantee or the
consummation of any of the transactions contemplated by this Agreement or any of
the other Basic Documents, (iii) seeking any determination or ruling that could
6
<PAGE>
reasonably be expected to materially and adversely affect Illinois Power's
performance of its obligations under, or the validity or enforceability of, this
Agreement, any of the other Basic Documents or the Notes, or (iv) which could
reasonably be expected to adversely affect the Federal or state income tax
attributes of the Notes.
SECTION 3.07. APPROVALS. No approval, authorization, consent, order or
other action of, or filing with, any court, Federal or state regulatory body,
administrative agency or other governmental instrumentality is required in
connection with Illinois Power's execution and delivery of this Agreement,
Illinois Power's performance of the transactions contemplated hereby or Illinois
Power's fulfillment of the terms hereof, except those that have been obtained or
made (it being understood that Illinois Power nonetheless has ongoing legal
obligations to make future filings with the ICC relating to Illinois Power's use
of proceeds from the transactions contemplated hereby and the final terms of
each Series of Notes issued pursuant to the Indenture).
SECTION 3.08. THE 1998 TRANSITION PROPERTY.
(a) INFORMATION. All information provided by Illinois Power to the
Grantee with respect to the 1998 Transition Property (including the 1998 Funding
Order and the 1998 Initial Tariff) is correct in all material respects.
(b) TITLE. It is the intention of the parties hereto that the vesting of
the 1998 Transition Property in the Grantee as contemplated by the 1998 Funding
Order shall be irrevocable and enforceable against Illinois Power and its
successors and that no interest in or title to the 1998 Transition Property
shall be part of Illinois Power's estate in the event of the filing of a
bankruptcy petition by or against Illinois Power under any bankruptcy law.
Accordingly, Illinois Power reaffirms that it has no right, title or interest in
and to the 1998 Transition Property and any sale,
7
<PAGE>
transfer, assignment, set over and conveyance which may nonetheless be
contemplated by Section 2.01 hereof shall constitute an absolute transfer to
the Grantee, within the meaning of Section 18-108 of the Funding Law, of any
right, title and interest Illinois Power may otherwise have had in the 1998
Transition Property (or any part thereof) created by, under and pursuant to
the 1998 Funding Order, such transfer is irrevocable and enforceable against
Illinois Power and its successors, and no interest in or title to the 1998
Transition Property shall be part of Illinois Power's estate in the event of
the filing of a bankruptcy petition by or against Illinois Power under any
bankruptcy law. No portion of the 1998 Transition Property has been sold,
transferred, assigned, pledged or otherwise conveyed by Illinois Power to any
Person other than the Grantee. Immediately prior to the transactions
contemplated hereunder, Illinois Power's right, title and interest in and to
all of its rights to payment under Applicable Rates is free and clear of all
Liens and rights of any other Person, and no offsets, defenses or
counterclaims exist or have been asserted with respect thereto.
(c) TRANSFER FILINGS. The 1998 Transition Property has been validly
granted and vested in the Grantee pursuant to the 1998 Funding Order and, to the
extent applicable, this Agreement, and the Grantee owns all right, title and
interest to the 1998 Transition Property, free and clear of all Liens and rights
of any other Person (other than Liens created pursuant to the Sale Agreement and
the Indenture), and all filings to be made by Illinois Power (including filings
with the ICC under the Funding Law) necessary in any jurisdiction to give the
Grantee a first priority perfected ownership interest in the 1998 Transition
Property, free and clear of all Liens, have been made. No further action is
required under Illinois law to maintain such ownership interest in the 1998
Transition Property. No further action, other than any filings or other steps
required to be taken with respect to proceeds or on account of events occurring
after the date hereof by Sections 9-103, 9-304, 9-306,
8
<PAGE>
9-402(7) or 9-403(2)-(3) of the UCC, is required to maintain such first
priority perfected ownership interest in the Related Assets.
(d) STATE PLEDGE. The State of Illinois has agreed with the Holders,
pursuant to Section 18-105(b) of the Funding Law, as follows:
"(b) The State pledges to and agrees with the holders of any
transitional funding instruments who may enter into contracts with an
electric utility, grantee, assignee or issuer pursuant to this Article
XVIII that the State will not in any way limit, alter, impair or reduce the
value of intangible transition property created by, or instrument funding
charges approved by, a transitional funding order so as to impair the terms
of any contract made by such electric utility, grantee, assignee or issuer
with such holders or in any way impair the rights and remedies of such
holders until the pertinent grantee instruments or, if the related
transitional funding order does not provide for the issuance of grantee
instruments, the pertinent transitional funding instruments and interest,
premium and other fees, costs and charges related thereto, as the case may
be, are fully paid and discharged. Electric utilities, grantees and
issuers are authorized to include these pledges and agreements of the State
in any contract with the holders of transitional funding instruments or
with any assignees pursuant to this Article XVIII and any assignees are
similarly authorized to include these pledges and agreements of the State
in any contract with any issuer, holder or any other assignee. Nothing in
this Article XVIII shall preclude the State of Illinois from requiring
adjustments as may otherwise be allowed by law to the electric utility's
base rates, transition charges, delivery services charges, or other charges
for tariffed services, so long as any such adjustment does not directly
affect or impair any instrument funding charges previously authorized by a
transitional funding order issued by the [ICC]."
As a result of the foregoing pledge, the State of Illinois may not, except as
provided in the succeeding sentence, in any way reduce, postpone, impair or
terminate the 1998 Transition Property in a manner substantially impairing the
Indenture or the rights and remedies of the Holders (and consequently, may not
revoke, reduce, postpone or terminate the 1998 Funding Order or the rights of
the Holders to receive IFC Payments and all other proceeds of the 1998
Transition Property), until the Notes, together with interest thereon, are fully
paid and discharged. Notwithstanding the immediately preceding sentence, the
State would be allowed to effect a temporary impairment of the
9
<PAGE>
Holders' rights if it could be shown that a temporary impairment was
necessary to advance a significant and legitimate public purpose.
(e) 1998 FUNDING ORDER AND TARIFFS; OTHER APPROVALS. (i) Illinois Power
was authorized to file the Application, (ii) Illinois Power filed the
Application with the ICC on June 24, 1998, in proper form, requesting the
issuance of a transitional funding order; (iii) the 1998 Funding Order and 1998
Initial Tariff established, created and granted rights in and to intangible
transition property in an aggregate amount of $1.634 billion, and the 1998
Transition Property and the right to impose and collect IFCs constitute current
and original property rights vested in the Grantee to the fullest extent
permitted by law; (iv) the 1998 Funding Order has been duly entered by the ICC,
is valid and binding, is Final and is in full force and effect; (v) the 1998
Initial Tariff is in full force and effect, is valid and binding, and is not
subject to modification by the ICC except as provided under the Funding Law;
(vi) as of the issuance of the Notes, the Notes are entitled to the protections
provided in Section 18-104(c) of the Funding Law and, accordingly, the 1998
Funding Order, the 1998 Transition Property and the IFCs are not revocable by
the ICC; (vii) the ICC may not reduce, postpone, impair or terminate the 1998
Transition Property, the 1998 Funding Order or the IFCs; (viii) the process by
which the 1998 Funding Order was adopted and approved and the 1998 Initial
Tariff was filed, and the 1998 Funding Order and the 1998 Initial Tariff
themselves, comply with all applicable laws, rules and regulations and the ICC
may not revoke, amend or otherwise change the 1998 Initial Tariff in any manner
which would defeat the expectations of the Holders to receive IFC Payments on a
timely basis; and (ix) no other approval, authorization, consent, order or other
action of, or filing with, any court, Federal or state regulatory body,
administrative agency or other governmental instrumentality is required in
connection with the creation and grant of the 1998
10
<PAGE>
Transition Property, except those that have been obtained or made and those
filings described in Section 3.07.
(f) ASSUMPTIONS. The assumptions used in calculating the IFCs are
reasonable and made in good faith.
(g) CREATION OF 1998 TRANSITION PROPERTY. Upon the effectiveness of the
1998 Initial Tariff: (i) all of the 1998 Transition Property constitutes a
current property right vested in the Grantee; (ii) the 1998 Transition Property
includes, without limitation, (A) the right, title and interest in the IFCs
authorized under the 1998 Funding Order, as adjusted from time to time, (B) the
right, title and interest in all revenues, collections, claims, payments, money
or proceeds of or arising from the IFCs set forth in the 1998 Initial Tariff,
and (C) all rights to compel Illinois Power, as Servicer (or any successor), to
file for and obtain adjustments to the IFCs pursuant to the 1998 Funding Order;
and (iii) the Grantee is entitled to impose and collect the IFCs described in
the 1998 Funding Order and the 1998 Initial Tariff in an aggregate amount equal
to the principal amount of the Notes, all interest thereon, all amounts required
to be deposited in the Reserve Subaccount, the Over-collateralization Subaccount
and the Capital Subaccount, and all related fees, costs and expenses in respect
of the Notes until they have been paid in full, subject only to the $1.634
billion limitation set forth in the 1998 Funding Order as to the maximum dollar
amount of 1998 Transition Property created thereunder.
(h) PROPERTY OF GRANTEE. To the fullest extent permitted by the Funding
Law and all other applicable law, the 1998 Transition Property and the right to
impose and collect IFCs contemplated thereunder constitute current property
rights of the Grantee and its assigns, including the Note Issuer and its assigns
(including the Indenture Trustee on behalf of the Holders), which property has
been
11
<PAGE>
placed beyond the reach of Illinois Power and its creditors, as in a true
sale, and which property rights may not be limited, altered, impaired,
reduced or otherwise terminated by any subsequent actions of Illinois Power
or any third party and which shall, to the full extent permitted by law, be
enforceable against Illinois Power, its successors and assigns, and all other
third parties (including judicial lien creditors) claiming an interest
therein by or through Illinois Power or its successors and assigns.
(i) NATURE OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties set forth in this SECTION 3.08, insofar as they involve conclusions
of law, are made not on the basis that Illinois Power purports to be a legal
expert or to be rendering legal advice, but rather to reflect the parties' good
faith understanding of the legal basis on which the parties are entering into
this Agreement and the other Basic Documents and the basis on which the Holders
are purchasing the Notes, and to reflect the parties' agreement that, if such
understanding turns out to be incorrect or inaccurate, Illinois Power will be
obligated to indemnify the Grantee and its permitted assigns, and that the
Grantee and its permitted assigns will be entitled to enforce any rights and
remedies under the documents, on account of such inaccuracy to the same extent
as if Illinois Power had breached any other representations or warranties
hereunder.
ARTICLE IV
COVENANTS OF ILLINOIS POWER
SECTION 4.01. CORPORATE EXISTENCE. So long as any of the Notes are
outstanding, Illinois Power (a) will keep in full force and effect its
existence, rights and franchises as a corporation under the laws of the State of
Illinois (unless it becomes, or any successor to Illinois
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Power hereunder is or becomes, organized under the laws of any other State or
of the United States of America, in which case Illinois Power will keep in
full effect its existence, rights and franchises under the laws of such other
jurisdiction), (b) will obtain and preserve its qualification to do business,
in each case to the extent that in each such jurisdiction such existence or
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, and any of the other Basic Documents to
which Illinois Power is a party and each other instrument or agreement
necessary or appropriate to the proper administration of this Agreement and
the transactions contemplated hereby and (c) at all times hereafter, neither
Illinois Power nor any successor will cause or permit the Grantee or the Note
Issuer to elect to be classified as an association taxable as a corporation
for federal income tax purposes.
SECTION 4.02. NO LIENS. Except for the conveyances hereunder, Illinois
Power (i) will not sell, pledge, assign or transfer to any other Person, or
grant, create, incur, assume, suffer to exist or otherwise assert any Lien on,
any of the 1998 Transition Property or any interest therein, (ii) will not at
any time assert any Lien against or with respect to any of the 1998 Transition
Property in its capacity as Servicer or otherwise, (iii) will not seek to limit,
alter, impair, reduce or otherwise terminate the property rights of the Grantee
or any assignee of the Grantee, and (iv) shall defend the right, title and
interest of the Grantee or the Note Issuer in, to and under the 1998 Transition
Property against all claims of third parties claiming through or under Illinois
Power.
SECTION 4.03. DELIVERY OF COLLECTIONS. If Illinois Power receives
collections in respect of the IFCs or the proceeds thereof, or in replacement
therefor, including, without limitation, any Allocable IFC Revenue Amounts,
Illinois Power agrees to hold such payments in trust for the Servicer and to pay
the Servicer all payments received by Illinois Power in respect thereof as soon
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as practicable after receipt thereof by Illinois Power, but in no event later
than two Business Days after such receipt.
SECTION 4.04. NOTICE OF LIENS. Illinois Power shall notify the Grantee,
the Note Issuer and the Indenture Trustee in writing promptly after becoming
aware of any Lien on any of the 1998 Transition Property other than the
conveyances hereunder, under the Sale Agreement and under the Indenture.
SECTION 4.05. COMPLIANCE WITH LAW. Illinois Power shall comply with its
organizational or governing documents and all laws, treaties, rules, regulations
and determinations of any governmental instrumentality applicable to it, to the
extent that failure to so comply would materially adversely affect the Note
Issuer's or the Indenture Trustee's interests in the 1998 Transition Property or
under any of the Basic Documents, or Illinois Power's performance of its
obligations hereunder or under any of the other Basic Documents to which it is
party. Without limiting the foregoing, Illinois Power shall comply with
applicable laws and regulations regarding its use of proceeds received
hereunder, including all applicable provisions of the Funding Law and the 1998
Funding Order.
SECTION 4.06. COVENANTS RELATED TO THE 1998 TRANSITION PROPERTY AND THE
NOTES.
(a) So long as any of the Notes are outstanding, Illinois Power shall
indicate in its financial statements that it is not the owner of the 1998
Transition Property.
(b) So long as any of the Notes are outstanding, Illinois Power shall not
own or purchase any Notes.
(c) Illinois Power agrees that upon the creation and grant of the 1998
Transition Property to the Grantee pursuant to the 1998 Funding Order and, to
the extent applicable, this Agreement, (i)
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to the fullest extent permitted by law, including applicable ICC Regulations,
the Grantee shall have all of the rights of the owner of the 1998 Transition
Property (including all of the rights originally held by Illinois Power, if
any, with respect to the 1998 Transition Property), including the right
(subject to the terms of the Servicing Agreement) to exercise any and all
rights and remedies to collect any amounts payable by any Customer or third
party collection agent, including any ARES, in respect of the 1998 Transition
Property, notwithstanding any objection or direction to the contrary by
Illinois Power and (ii) any payment by any Customer or third party collection
agent, including any ARES, to the Grantee (or to the Servicer for the benefit
of the Grantee) shall discharge such Customer's or third party's obligations
in respect of the 1998 Transition Property to the extent of such payment,
notwithstanding any objection or direction to the contrary by Illinois Power.
(d) So long as any of the Notes are outstanding, (i) except with respect
to federal and other applicable taxes, Illinois Power shall not make any
statement or reference in respect of the 1998 Transition Property that is
inconsistent with the ownership interest of the Grantee, and (ii) Illinois Power
shall not take any action in respect of the 1998 Transition Property except
solely in its capacity as the Servicer under the Servicing Agreement or as
otherwise contemplated by the Basic Documents.
(e) So long as any of the Notes are outstanding, Illinois Power shall not,
except as required by applicable law, initiate any material changes to its
policies and procedures pertaining to credit (including requirements for
deposits from Customers), billing, collections (including procedures for
disconnection of service for non-payment) and restoration of service after
disconnection, and shall not initiate any changes in any ICC tariffs relating to
the foregoing matters
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which are likely to materially and adversely affect Illinois Power's ability
to make timely recovery of amounts billed to Customers.
(f) If Illinois Power determines that the aggregate dollar amount of IFCs
to be imposed and collected is reasonably likely to exceed the maximum dollar
amount of Intangible Transition Property authorized by the 1998 Funding Order
and any Subsequent Funding Orders and any Notes remain outstanding, Illinois
Power shall make a good faith effort to take any and all subsequent regulatory
action with the ICC reasonably necessary to obtain an order permitting the
creation of additional Intangible Transition Property in an amount sufficient to
pay such Notes in full.
SECTION 4.07. PROTECTION OF TITLE. Illinois Power shall execute and file
such filings, including filings with the ICC pursuant to the Funding Law, and
cause to be executed and filed such filings, all in such manner and in such
places as may be required by law fully to preserve, maintain, and protect the
interests of the Grantee or the Note Issuer in the 1998 Transition Property,
including all filings required under the Funding Law relating to the grant of
the 1998 Transition Property to the Grantee. Illinois Power shall deliver (or
cause to be delivered) to the Grantee file-stamped copies of, or filing receipts
for, any document filed as provided above, promptly following such filing.
Illinois Power shall institute any action or proceeding necessary to compel
performance by the ICC or the State of Illinois of any of their obligations or
duties under the Funding Law, the 1998 Funding Order, the 1998 Initial Tariff or
any amendatory tariff filed pursuant to Section 18-104(k) of the Funding Law,
and Illinois Power agrees to take such legal or administrative actions,
including defending against or instituting and pursuing legal actions and
appearing or testifying at hearings or similar proceedings, as may be reasonably
necessary to protect the Grantee or the Note Issuer from claims, state actions
or other actions or proceedings of third parties which, if successfully
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pursued, would result in a breach of any representation set forth in Article
III hereof. The costs of any such actions or proceedings will be payable by
Illinois Power. Illinois Power designates the Grantee as its agent and
attorney-in-fact to execute any filings with the ICC or other instruments
required by the Grantee pursuant to this Section, it being understood that
the Grantee shall have no obligation to execute any such instruments.
SECTION 4.08. NONPETITION COVENANTS. Notwithstanding any prior
termination of this Agreement or the Indenture, but subject to the ICC's
right to order the sequestration and payment of revenues arising with respect
to the 1998 Transition Property notwithstanding any bankruptcy,
reorganization or other insolvency proceedings with respect to Illinois
Power, the Grantee or any other grantee or assignee of the 1998 Transition
Property pursuant to Section 18-107(c)(4) of the Funding Law, Illinois Power
shall not, prior to the date which is one year and one day after the
termination of the Indenture, acquiesce, petition or otherwise invoke or
cause or join with any other Person to invoke the process of any court or
governmental authority for the purpose of commencing or sustaining a case
against the Grantee or the Note Issuer under any Federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of or for the
Grantee or the Note Issuer or any substantial part of the property of the
Grantee or the Note Issuer, or ordering the winding up or liquidation of the
affairs of the Grantee or the Note Issuer.
SECTION 4.09. TAXES. So long as any of the Notes are outstanding,
Illinois Power shall, and shall cause each of its subsidiaries to, pay all
material taxes, assessments and governmental charges imposed upon it or any of
its properties or assets or with respect to any of its franchises, business,
income or property before any penalty accrues thereon if the failure to pay any
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such taxes, assessments and governmental charges would, after any applicable
grace periods, notices or other similar requirements, result in a lien on the
1998 Transition Property; PROVIDED that no such tax need be paid if Illinois
Power or one of its subsidiaries is contesting the same in good faith by
appropriate proceedings promptly instituted and diligently conducted and if
Illinois Power or such subsidiary has established appropriate reserves as
shall be required in conformity with generally accepted accounting principles.
SECTION 4.10. CONTRACTS FOR NON-TARIFFED SERVICES. Neither Illinois Power
nor any successor thereto shall enter into any contract with any Customer
obligated (or who would, but for such contract, be obligated) to pay IFCs if,
as a result thereof, such Customer would not receive tariffed services, unless
the contract provides that the Customer will pay an amount to the Grantee or its
assigns or to Illinois Power, as Servicer, as applicable, equal to the amount
such Customer would pay in IFCs if the services provided under such contract
were tariffed services. Any revenues received by Illinois Power or such
successor from any such contract services shall, to the extent of the authorized
amount of the IFCs included therein (or deemed included therein pursuant to the
1998 Funding Order and this Section), be deemed to be proceeds of, and included
in, the 1998 Transition Property.
SECTION 4.11. PRESERVATION OF RIGHT OF NOTEHOLDERS TO RECEIVE PAYMENT. In
addition to any obligations of Illinois Power under the Servicing Agreement,
Illinois Power recognizes and agrees that any impairment of the rights of
Holders with respect to the collection of IFCs and payments on the Notes,
arising from a declaration of invalidity of the Amendatory Act and/or the
Funding Law occurring after Illinois Power and its Affiliates received the
proceeds of such Notes, would not be equitable. Illinois Power agrees, in
consideration of the receipt of such proceeds, to
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take any and all actions reasonably necessary to preserve the rights of
Holders with respect to payments on the Notes out of the payments represented
by IFCs or their equivalent, including, but not limited to, (i) making
appropriate filings with the State of Illinois, the ICC or other regulatory
bodies to defend, preserve and create on behalf of Holders the right to
receive payments as provided in the Notes, (ii) defending against or
instituting and pursuing legal actions and appearing or testifying at
hearings or similar proceedings, as may be necessary to block or overturn any
attempts to cause a repeal of, modification of or supplement to or judicial
invalidation of the Amendatory Act or any Funding Order or the rights of
holders of Intangible Transition Property by legislative enactment or
otherwise that would be adverse to the Grantee, the Note Issuer or any
Holders, and (iii) unless otherwise expressly prohibited by applicable law or
judicial or regulatory order in effect at such time, continuing to deduct and
pay over to the Servicer for the benefit of the Note Issuer all IFCs and IFC
Payments or equivalent revenues received by Illinois Power notwithstanding
any declaration of invalidity of the Amendatory Act, the Funding Law and/or
the Funding Order.
ARTICLE V
ILLINOIS POWER
SECTION 5.01. LIABILITY OF ILLINOIS POWER; INDEMNITIES.
(a) Illinois Power shall indemnify the Grantee, the Note Issuer, the
Indenture Trustee and the Delaware Trustee and each of their respective
officers, directors, employees and agents for, and defend and hold harmless each
such Person from and against, any and all taxes (i) that may at any time be
imposed on or asserted against any such Person as a result of the grant of the
1998 Transition Property to the Grantee, or (ii) that may be imposed on or
asserted against any such Person under
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existing law as of the Series Issuance Date as a result of the Grantee's
ownership and assignment of the 1998 Transition Property, the Note Issuer's
issuance and sale of the Notes, or the other transactions contemplated
herein, including, in each case, any sales, gross receipt, general
corporation, tangible personal property, privilege or license taxes (but
excluding any taxes imposed as a result of a failure of such Person to
properly withhold or remit taxes imposed with respect to payments on any
Notes).
(b) Illinois Power shall indemnify the Grantee, the Note Issuer, the
Indenture Trustee, the Delaware Trustee and the Holders and each of their
respective officers, directors, employees and agents for, and defend and hold
harmless each such Person from and against, any and all amounts of principal and
interest on the Notes not paid when due in accordance with their terms and the
amount of any deposits to the Note Issuer required to have been made in
accordance with the terms of the Basic Documents which are not made when so
required and any and all liabilities, obligations, claims, actions, suits or
payments, of any kind whatsoever that may be imposed on or asserted against any
such Person, together with any reasonable costs and expenses incurred by such
Person (collectively, "Losses"), as a result of Illinois Power's breach of any
of its representations, warranties or covenants contained in this Agreement.
(c) Illinois Power shall pay any and all taxes levied or assessed upon all
or any part of the Grantee's property or assets based on existing law as of the
Closing Date.
(d) Indemnification under Sections 5.01(a) through 5.01(c) shall survive
the termination of this Agreement and shall include reasonable fees and expenses
of investigation and litigation (including reasonable attorneys' fees and
expenses).
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SECTION 5.02. MERGER OR CONSOLIDATION OF OR ASSUMPTION OF THE OBLIGATIONS
OF ILLINOIS POWER. Any Person (a) into which Illinois Power may be merged or
consolidated, (b) which may result from any merger or consolidation to which
Illinois Power shall be a party or (c) which may succeed to the properties and
assets of Illinois Power substantially as a whole, which Person in any of the
foregoing cases executes an agreement of assumption to perform every obligation
of Illinois Power hereunder, shall be the successor to Illinois Power under this
Agreement without further act on the part of any of the parties to this
Agreement; PROVIDED, HOWEVER, that (i) immediately after giving effect to such
transaction, no representation or warranty made pursuant to Article III shall
have been breached and (if Illinois Power is the Servicer) no Servicer Default,
and no event which, after notice or lapse of time, or both, would become a
Servicer Default shall have occurred and be continuing, (ii) Illinois Power
shall have delivered to the Grantee, the Note Issuer, the Delaware Trustee and
the Indenture Trustee an Officers' Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession and such agreement of
assumption comply with this Section and that all conditions precedent, if any,
provided for in this Agreement relating to such transaction have been complied
with, (iii) Illinois Power shall have delivered to the Grantee, the Note Issuer
and the Indenture Trustee an Opinion of Counsel either (x) stating that, in the
opinion of such counsel, all filings to be made by Illinois Power, including
filings with the ICC pursuant to the Funding Law, have been executed and filed
that are necessary to fully preserve and protect the interest of the Grantee in
the 1998 Transition Property and reciting the details of such filings, or (y)
stating that, in the opinion of such counsel, no such action shall be necessary
to preserve and protect such interests, (iv) the Rating Agencies shall have
received prior written notice of such transaction and (v) Illinois Power shall
have delivered to the Grantee, the Note Issuer, the Delaware Trustee and
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the Indenture Trustee an opinion of independent tax counsel (as selected by,
and in form and substance reasonably satisfactory to, Illinois Power and
which may be based on a ruling from the Internal Revenue Service) to the
effect that such consolidation or merger will not result in a material
adverse federal income tax consequence to Illinois Power, the Grantee, the
Note Issuer, the Delaware Trustee, the Indenture Trustee or the then existing
Holders. Notwithstanding anything herein to the contrary, the execution of
the foregoing agreement of assumption and compliance with clauses (i), (ii),
(iii), (iv) and (v) above shall be conditions to the consummation of any
transaction referred to in clauses (a), (b) or (c) above. When any Person
acquires the properties and assets of Illinois Power substantially as a whole
and becomes the successor to Illinois Power in accordance with the terms of
this Section 5.02, then upon the satisfaction of all of the other conditions
of this Section 5.02, Illinois Power shall automatically and without further
notice be released from its obligations hereunder.
SECTION 5.03. LIMITATION ON LIABILITY OF ILLINOIS POWER AND OTHERS.
Illinois Power and any director or officer or employee or agent of Illinois
Power may rely in good faith on the advice of counsel or on any document of any
kind, PRIMA FACIE properly executed and submitted by any Person, respecting any
matters arising hereunder. Subject to Sections 4.07 and 4.11, Illinois Power
shall not be under any obligation to appear in, prosecute or defend any legal
action that shall not be incidental to its obligations under this Agreement, and
that in its opinion may involve it in any expense or liability.
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ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.01. AMENDMENT. The Agreement may be amended by Illinois Power
and the Grantee, with prior written notice given to the Rating Agencies and the
prior written consent of the Note Issuer, but without the consent of any of the
Holders, to cure any ambiguity, to correct or supplement any provisions in this
Agreement or for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions in this Agreement or of modifying in
any manner the rights of the Holders; PROVIDED, HOWEVER, that such action shall
not, as evidenced by a Illinois Power Officer's Certificate delivered to the
Note Issuer, adversely affect in any material respect the interests of any
Holder.
This Agreement may also be amended from time to time by Illinois Power and
the Grantee, with prior written notice given to the Rating Agencies and the
prior written consent of the Note Issuer, the Indenture Trustee and Holders
holding not less than a majority of the Outstanding Amount of the Notes of all
Series affected thereby, for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Holders; PROVIDED, HOWEVER, that no
such amendment shall (a) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, IFC Collections or (b) reduce the aforesaid
percentage of the Outstanding Amount of the Notes, the Holders of which are
required to consent to any such amendment, without the consent of the Holders of
all the outstanding Notes.
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Promptly after the execution of any such amendment or consent, the Grantee
shall furnish a copy of such amendment or consent to the Note Issuer, the
Indenture Trustee and each of the Rating Agencies.
It shall not be necessary for the consent of Holders pursuant to this
Section to approve the particular form of any proposed amendment or consent, but
it shall be sufficient if such consent shall approve the substance thereof.
SECTION 6.02. NOTICES. All demands, notices and communications upon or to
the Grantee, the Note Issuer, the Indenture Trustee or the Rating Agencies under
this Agreement shall be in writing, personally delivered, mailed or sent by
telecopy or other similar form of rapid transmission, and shall be deemed to
have been duly given upon receipt (a) in the case of Illinois Power, to Illinois
Power Company, 500 South 27th Street, Decatur, Illinois 62525; (b) in the case
of the Grantee, to Illinois Power Securitization Limited Liability Company, c/o
Illinois Power Company, 500 South 27th Street, Decatur, Illinois 62525; (c) in
the case of the Note Issuer, to Transitional Funding Trust, c/o First Union
Trust Company, National Association, One Rodney Square, 920 King Street, 1st
Floor, Wilmington, Delaware 19801, Attention: Corporate Trust Administration;
(d) in the case of the Indenture Trustee, at the Corporate Trust Office; (e) in
the case of Moody's, to Moody's Investors Service, Inc., ABS Monitoring
Department, 99 Church Street, New York, New York 10007; (f) in the case of
Standard & Poor's, to Standard & Poor's Corporation, 26 Broadway (10th Floor),
New York, New York 10004, Attention: Asset Backed Surveillance Department; (g)
in the case of Fitch IBCA, to Fitch IBCA, Inc., One State Street Plaza, New
York, New York 10004, Attention: ABS Surveillance; or (h) in the case of Duff &
Phelps, to Duff & Phelps Credit Rating Co., 17 State Street, 12th Floor, New
York, New York 10004, Attention: Asset
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Based Monitoring Group; or as to each of the foregoing, at such other address
as shall be designated by written notice to the other parties.
SECTION 6.03. ASSIGNMENT. Notwithstanding anything to the contrary
contained herein, except as provided in Section 5.02, this Agreement may not be
assigned by Illinois Power.
SECTION 6.04. LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of Illinois Power, the Grantee, the Note
Issuer, the Indenture Trustee, the Delaware Trustee and the Holders, and nothing
in this Agreement, whether express or implied, shall be construed to give to any
other Person any legal or equitable right, remedy or claim in the 1998
Transition Property or under or in respect of this Agreement or any covenants,
conditions or provisions contained herein.
SECTION 6.05. SEVERABILITY. Any provision of this Agreement that is
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.
SECTION 6.06. SEPARATE COUNTERPARTS. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 6.07. HEADINGS. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
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SECTION 6.08. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of Illinois, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 6.09. ASSIGNMENTS TO NOTE ISSUER AND INDENTURE TRUSTEE. Illinois
Power acknowledges and consents to any transfer, pledge, assignment or grant of
a security interest by the Grantee to the Note Issuer pursuant to the Sale
Agreement, and by the Note Issuer to the Indenture Trustee for the benefit of
the Holders pursuant to the Indenture, of all right, title and interest of the
Grantee in, to and under the 1998 Transition Property and the proceeds thereof,
and the assignment of any or all of the Grantee's rights and obligations
hereunder to the Note Issuer and the Indenture Trustee. Illinois Power agrees
that the Note Issuer and the Indenture Trustee, as assignees, shall, subject to
the terms of the Basic Documents, have the right to enforce this Agreement and
to exercise directly all of the Grantee's rights and remedies under this
Agreement (including without limitation, the right to give or withhold any
consents or approvals of the Grantee to be given or withheld hereunder), and
acknowledges that with respect to the sale, transfer, assignment, set over and
conveyance of the 1998 Transition Property and Related Assets to the Note Issuer
and the pledge thereof to the Indenture Trustee pursuant to the Indenture, the
Note Issuer and the Indenture Trustee have relied on the representations and
warranties made by Illinois Power herein.
SECTION 6.10. HOLDERS AS THIRD-PARTY BENEFICIARIES. Illinois Power and
the Grantee agree that the Holders and the Indenture Trustee are express
third-party beneficiaries of the provisions of this Agreement and that the
Indenture Trustee, on behalf of the Holders, shall have the right to enforce
the terms hereof as provided in Section 6.09 hereof. Illinois Power will
take all
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appropriate actions to perfect and maintain the perfection of the Grantee's
and the Note Issuer's ownership interest in any of the 1998 Transition
Property and to perfect and maintain the perfection of the Indenture
Trustee's security interest in such 1998 Transition Property and all other
Note Collateral.
SECTION 6.11. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. In addition to
the survival of representations and warranties as set forth in Article III, (a)
the agreements, representations, warranties, indemnities and other statements of
Illinois Power or its officers set forth in or made pursuant to this Agreement
will remain in full force and effect and will survive the grant of the 1998
Transition Property and the issuance and delivery of the Notes and (b) to the
fullest extent permitted by applicable law, the provisions of Articles III, IV
and V hereof shall survive the termination, cancellation or invalidity of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
ILLINOIS POWER COMPANY
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
ILLINOIS POWER SECURITIZATION LIMITED
LIABILITY COMPANY, Grantee
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE>
EXHIBIT 10.3
FORM OF SERVICING AGREEMENT
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INTANGIBLE TRANSITION PROPERTY SERVICING AGREEMENT
between
ILLINOIS POWER SECURITIZATION LIMITED LIABILITY COMPANY,
Grantee
and
ILLINOIS POWER COMPANY,
Servicer
Dated as of December ___, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . .2
SECTION 1.02. Other Definitional Provisions . . . . . . . . . . . . . . . . .4
ARTICLE II
Appointment and Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . .5
SECTION 2.01. Appointment of Servicer; Acceptance of Appointment. . . . . . .5
SECTION 2.02. Authorization . . . . . . . . . . . . . . . . . . . . . . . . .5
SECTION 2.03. Dominion and Control Over the Intangible Transition Property. .5
ARTICLE III
Billing Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
SECTION 3.01. Duties of Servicer. . . . . . . . . . . . . . . . . . . . . . .6
SECTION 3.02. Servicing and Maintenance Standards . . . . . . . . . . . . . .9
SECTION 3.03. Certificate of Compliance . . . . . . . . . . . . . . . . . . 10
SECTION 3.04. Annual Report by Independent Public Accountants . . . . . . . 11
SECTION 3.05. Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV
Services Related to Adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.01. Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.02. Limitation of Liability . . . . . . . . . . . . . . . . . . . 17
SECTION 4.03. Monitoring of Third-Party Collectors. . . . . . . . . . . . . 18
ARTICLE V
The Intangible Transition Property . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 5.01. Custody of Intangible Transition Property Records . . . . . . 23
SECTION 5.02. Duties of Servicer as Custodian . . . . . . . . . . . . . . . 23
SECTION 5.03. Instructions; Authority to Act. . . . . . . . . . . . . . . . 26
SECTION 5.04. Custodian's Indemnification . . . . . . . . . . . . . . . . . 26
SECTION 5.05. Effective Period and Termination. . . . . . . . . . . . . . . 27
SECTION 5.06. General Indemnification of Indenture Trustee and Delaware
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE VI
The Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 6.01. Representations and Warranties of Servicer. . . . . . . . . . 28
SECTION 6.02. Indemnities of Servicer; Release of Claims. . . . . . . . . . 31
i
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SECTION 6.03. Merger or Consolidation of or Assumption of the Obligations
of Servicer . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 6.04. Limitation on Liability of Servicer and Others. . . . . . . . 33
SECTION 6.05. Illinois Power Not to Resign as Servicer. . . . . . . . . . . 34
SECTION 6.06. Servicing Compensation. . . . . . . . . . . . . . . . . . . . 34
SECTION 6.07. Compliance with Applicable Law. . . . . . . . . . . . . . . . 35
SECTION 6.08. Access to Certain Records and Information Regarding
Intangible Transition Property. . . . . . . . . . . . . . . . 36
SECTION 6.09. Appointments. . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 6.10. No Servicer Advances. . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.11. Remittances . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.12. Compliance with Servicing Standard; Changes in ICC Tariffs. . 38
ARTICLE VII
Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 7.01. Servicer Default. . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 7.02. Appointment of Successor. . . . . . . . . . . . . . . . . . . 41
SECTION 7.03. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . 42
SECTION 7.04. Notice of Servicer Default. . . . . . . . . . . . . . . . . . 43
ARTICLE VIII
Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 8.01. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 8.02. Maintenance of Records. . . . . . . . . . . . . . . . . . . . 45
SECTION 8.03. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 8.04. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 8.05. Limitations on Rights of Others . . . . . . . . . . . . . . . 46
SECTION 8.06. Severability. . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 8.07. Separate Counterparts . . . . . . . . . . . . . . . . . . . . 46
SECTION 8.08. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 8.09. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 8.10. Assignments to Note Issuer and Indenture Trustee. . . . . . . 47
SECTION 8.11. Nonpetition Covenants . . . . . . . . . . . . . . . . . . . . 47
SECTION 8.12. Limitation of Liability . . . . . . . . . . . . . . . . . . . 48
SECTION 8.13. Final Termination . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
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EXHIBITS AND SCHEDULES
Exhibit A Form of Monthly Servicer's Certificate
Exhibit B Form of Certificate of Compliance
Exhibit C Form of Amendatory Tariff
Exhibit D Form of Quarterly Servicer's Certificate
Schedule 4.01(a) Expected Amortization Schedule
Schedule 6.01(f) No Proceedings
ANNEXES
Annex I - Servicing Procedures
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INTANGIBLE TRANSITION PROPERTY SERVICING AGREEMENT dated as of
December ___, 1998, between ILLINOIS POWER SECURITIZATION LIMITED LIABILITY
COMPANY, a Delaware limited liability company (the "Grantee"), and ILLINOIS
POWER COMPANY, an Illinois corporation, as Servicer (the "Servicer").
RECITALS
A. Pursuant to the Funding Law and the 1998 Transitional Funding Order,
the Grantee and the Note Issuer are concurrently entering into the Sale
Agreement, pursuant to which the Grantee is selling the 1998 Intangible
Transition Property to the Note Issuer, and the Grantee may sell Subsequent
Intangible Transition Property to the Note Issuer pursuant to Subsequent Sale
Agreements.
B. In connection with its ownership of the Intangible Transition
Property and in order to collect the IFCs, the Grantee desires to engage the
Servicer to carry out the functions described herein. The Servicer currently
performs similar functions for itself with respect to its own charges to its
customers and may in the future perform such functions for others. In
addition, the Grantee desires to engage the Servicer to act on its behalf in
making Adjustments. The Servicer desires to perform all of these activities
on behalf of the Grantee.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
<PAGE>
ARTICLE 1
DEFINITIONS
SECTION 1.01. DEFINITIONS.
(a) Capitalized terms used herein and not otherwise defined herein have
the meanings assigned to them in that certain Indenture (including Appendix A
thereto) dated as of the date hereof between the Note Issuer and Harris Trust
and Savings Bank, as the Indenture Trustee, as the same may be amended,
supplemented or otherwise modified from time to time (the "INDENTURE").
(b) Whenever used in this Agreement, the following words and phrases
shall have the following meanings:
"AGREEMENT" means this Intangible Transition Property Servicing
Agreement, together with all Exhibits, Schedules, Annexes and Attachments
hereto, as the same may be amended, supplemented and otherwise modified from
time to time.
"ALTERNATIVE REMITTANCE REQUIREMENT" means, with respect to any
Third-Party Collector, that such Third-Party Collector is obligated to remit
payments more frequently than under the Fifteen-Day Remittance Option or the
Seven-Day Remittance Option.
"ANNUAL ACCOUNTANT'S REPORT" has the meaning set forth in Section 3.04.
"AMENDATORY TARIFF" means an amendment to any Tariff substantially in
the form of Exhibit C.
C.
"CERTIFICATE OF COMPLIANCE" has the meaning set forth in Section 3.03.
"DAILY REMITTANCE" has the meaning set forth in Section 6.11(a).
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"FIFTEEN-DAY REMITTANCE OPTION" means, with respect to any Third-Party
Collector, the option set forth in the 1998 Initial Tariff to remit IFCs
(whether or not collected from customers) within fifteen days of billing by
the Servicer.
"IFC CUSTOMER CLASS" has the meaning set forth in Annex I.
"INTANGIBLE TRANSITION PROPERTY RECORDS" has the meaning assigned to
that term in Section 5.01.
5.01.
"LOSSES" has the meaning assigned to that term in Section 5.04.
"MONTHLY SERVICER'S CERTIFICATE" has the meaning assigned to that term
in Section 3.01(b)(i).
"OFFICER'S CERTIFICATE" means a certificate signed by a Responsible
Officer.
"RETIREMENT OF THE NOTES" means the day on which the final distribution
is made to the Indenture Trustee in respect of the last Outstanding Notes.
"SERVICER DEFAULT" has the meaning assigned to that term in Section 7.01.
"SERVICING STANDARD" means the obligation of the Servicer to calculate,
collect, apply, remit and reconcile proceeds of the Intangible Transition
Property, including IFC Payments, and all other Note Collateral for the
benefit of the Note Issuer and the Holders (i) with the same degree of care
and diligence as the Servicer applies with respect to payments owed to it for
its own account, (ii) in accordance with all applicable procedures and
requirements established by the ICC for collection of electric utility
tariffs and (iii) in accordance with the other terms of this Agreement.
"SEVEN-DAY REMITTANCE OPTION" means, with respect to any Third-Party
Collector, the option set forth in the 1998 Initial Tariff to remit IFC
Payments within seven days of such Third-Party Collector's receipt from
Customers.
"TERMINATION NOTICE" has the meaning assigned to that term in
Section 7.01.
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"THIRD-PARTY COLLECTOR" means each third-party, including each Applicable
ARES, which, pursuant to any Tariff, any other tariffs filed with the ICC, or
any agreement with Illinois Power, is obligated to remit IFCs or IFC Payments to
Illinois Power.
SECTION 1.02. OTHER DEFINITIONAL PROVISIONS.
(a) Non-capitalized terms used herein which are defined in the Public
Utilities Act shall, as the context requires, have the meanings assigned to such
terms in the Public Utilities Act, but without giving effect to amendments to
the Public Utilities Act after the date hereof which have a material adverse
effect on the Note Issuer or the Holders.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) The words "hereof," "herein," "hereunder" and words of similar import,
when used in this Agreement, shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Section, Schedule, Exhibit, Annex
and Attachment references contained in this Agreement are references to
Sections, Schedules, Exhibits, Annexes and Attachments in or to this Agreement
unless otherwise specified; and the term "including" shall mean "including
without limitation."
(d) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter forms of such terms.
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<PAGE>
ARTICLE II
APPOINTMENT AND AUTHORIZATION
SECTION 2.01. APPOINTMENT OF SERVICER; ACCEPTANCE OF APPOINTMENT.
Subject to Section 6.05 and Article 7, the Grantee appoints the Servicer, and
the Servicer accepts such appointment, to perform the Servicer's obligations
pursuant to this Agreement on behalf of and for the benefit of the Grantee or
any assignee thereof in accordance with the terms of this Agreement and
applicable law. This appointment and the Servicer's acceptance thereof may
not be revoked except in accordance with the express terms of this Agreement.
SECTION 2.02. AUTHORIZATION. With respect to all or any portion of
the Intangible Transition Property, the Servicer shall be and is authorized
and empowered by the Grantee to (a) execute and deliver, on behalf of itself
and/or the Grantee, as the case may be, any and all instruments, documents or
notices, and (b) on behalf of itself and/or the Grantee, as the case may be,
make any filing and participate in proceedings of any kind with any
governmental authorities, including with the ICC. The Grantee shall furnish
the Servicer with such documents as have been prepared by the Servicer for
execution by the Grantee, and with such other documents as may be in the
Grantee's possession, as necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties hereunder. Upon the
Servicer's written request, the Grantee shall furnish the Servicer with any
powers of attorney or other documents necessary or appropriate to enable the
Servicer to carry out its duties hereunder.
SECTION 2.03. DOMINION AND CONTROL OVER THE INTANGIBLE TRANSITION
PROPERTY. Notwithstanding any other provision herein, the Grantee shall have
dominion and control over the Intangible Transition Property, and the Servicer,
in accordance with the terms hereof, is acting solely
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<PAGE>
as the servicing agent and custodian for the Grantee with respect to the
Intangible Transition Property and the Intangible Transition Property
Records. The Servicer shall not take any action that is not authorized by
this Agreement, that is not consistent with its customary procedures and
practices, or that shall impair the rights of the Grantee in the Intangible
Transition Property, in each case unless such action is required by
applicable law.
ARTICLE III
BILLING SERVICES
SECTION 3.01. DUTIES OF SERVICER. The Servicer, as agent for the
Grantee, shall have the following duties:
(a) DUTIES OF SERVICER GENERALLY. The Servicer's duties in general
shall include management, servicing and administration of the Intangible
Transition Property (including maintaining records of the cumulative total of
IFCs and verifying that such amount has not exceeded the dollar amount of
Intangible Transition Property established by the ICC pursuant to a Funding
Order); on or before the date of issuance of any Series of Notes, filing
with the ICC the filing required by Section 18-107(c)(1) of the Funding Law
to perfect the lien of the Indenture Trustee in the Intangible Transition
Property; making such filings and initiating such proceedings with the ICC as
may be required to ensure that the dollar amount of Intangible Transition
Property authorized by the Funding Orders is adequate for the payment in full
of all principal of and interest on the Notes; obtaining meter reads,
calculating usage, billing, collections and posting of all payments in
respect of the Intangible Transition Property; responding to inquiries by
Customers, the ICC or any federal, local or other state governmental
authorities with respect to the Intangible Transition Property;
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<PAGE>
delivering Bills to Customers and ARES, investigating and handling
delinquencies, processing and depositing collections and making periodic
remittances; furnishing periodic reports to the Grantee, the Note Issuer, the
Indenture Trustee and the Rating Agencies; and taking all necessary action in
connection with Adjustments as set forth herein. Certain of the duties set
forth above may be performed by ARES pursuant to ARES Service Agreements.
The Servicer shall be allowed to perform its duties hereunder either directly
or by or through agents, attorneys, custodians, nominees or (with prior
written notice to the Rating Agencies) by delegating all or a portion of its
duties to any third parties; PROVIDED, however, that, notwithstanding any
such delegation of duties, the Servicer shall remain liable for the
performance of all its duties and obligations pursuant to the terms of this
Agreement and the other Basic Documents and such delegation shall not relieve
the Servicer of its liability and responsibility with respect to such duties
or obligations. The fees and expenses of any such persons to whom the
Servicer may delegate duties shall be as agreed between the Servicer and such
third parties from time to time, and, except for such fees and expenses which
are expressly reimbursable hereunder, such third-party fees and expenses
shall be payable solely by the Servicer out of its Servicing Fee and neither
the Grantee nor any assignee thereof shall have any responsibility therefor.
Anything to the contrary notwithstanding, the duties of the Servicer set
forth in this Agreement shall be qualified in their entirety by any ICC
Regulations as in effect at the time such duties are to be performed.
Without limiting the generality of this Section 3.01(a), in furtherance of
the foregoing, the Servicer shall also have, and shall comply with, the
duties and responsibilities relating to data acquisition, usage and bill
calculation, billing, customer service functions, collections, payment
processing and remittance set forth in Annex I hereto, including without
limitation payment of all Allocable IFC Revenue Amounts described therein.
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<PAGE>
(b) REPORTING FUNCTIONS.
(i) MONTHLY SERVICER'S CERTIFICATE. On or before the tenth calendar
day of each month (or, if such date is not a Servicer Business Day, on the
next Servicer Business Day), the Servicer shall prepare and deliver to the
Grantee, the Note Issuer, the Indenture Trustee and the Rating Agencies a
written report substantially in the form of EXHIBIT A hereto (a "Monthly
Servicer's Certificate") setting forth certain information relating to IFC
Payments received by the Servicer during the immediately preceding Billing
Period.
(ii) NOTIFICATION OF LAWS AND REGULATIONS. The Servicer shall
immediately notify the Grantee, the Note Issuer, the Indenture Trustee and
the Rating Agencies in writing of any laws or ICC Regulations hereafter
promulgated that have a material adverse effect on the Servicer's ability
to perform its duties under this Agreement.
(iii) OTHER INFORMATION. Upon the reasonable request of the Grantee,
the Note Issuer, the Indenture Trustee or any Rating Agency, the Servicer
shall provide to the Grantee, the Note Issuer, Indenture Trustee or the
Rating Agencies, as the case may be, any public financial information in
respect of the Servicer, or any material information regarding the
Intangible Transition Property to the extent it is reasonably available to
the Servicer, as may be reasonably necessary and permitted by law, to
enable the Grantee, the Note Issuer, the Indenture Trustee or the Rating
Agencies to monitor the Servicer's performance hereunder. In addition, so
long as any of the Notes of any Series are outstanding, the Servicer shall
provide the Grantee, the Note
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<PAGE>
Issuer and the Indenture Trustee, within a reasonable time after written
request therefor, any information available to the Servicer or reasonably
obtainable by it that is necessary to calculate the IFCs applicable to
each class of Customer.
(iv) PREPARATION OF REPORTS TO BE FILED WITH THE SEC. The Servicer
shall prepare any reports required to be filed by the Grantee or the Note
Issuer under the securities laws, including a copy of each Quarterly
Servicer's Certificate described in Section 4.01(c)(ii), the annual
Certificate of Compliance described in Section 3.03, and the Annual
Accountant's Report described in Section 3.04.
SECTION 3.02. SERVICING AND MAINTENANCE STANDARDS. On behalf of the
Grantee, the Servicer shall (i) manage, service, administer and make
collections in respect of the Intangible Transition Property with reasonable
care and in accordance with the Servicing Standard and applicable law,
including all applicable ICC Regulations and guidelines, using the same
degree of care and diligence that the Servicer exercises with respect to
similar assets for its own account and, if applicable, for others; (ii)
follow customary standards, policies and procedures for the industry in
performing its duties as Servicer; (iii) use all reasonable efforts,
consistent with its customary servicing procedures, to enforce, and maintain
rights in respect of, the Intangible Transition Property; (iv) comply with
all laws and regulations applicable to and binding on it relating to the
Intangible Transition Property, (v) make all required submissions and provide
all required notifications to the ICC with respect to any Adjustments, and
(vi) maintain facilities sufficient to enable the servicer to post IFC
Payments to customer accounts within two Servicer Business Days of receipt of
payment by the Servicer, in accordance with Annex I hereto. The Servicer
shall be responsible for the imposition, collection and remittance of IFCs in
accordance with Annex I hereto,
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<PAGE>
the inclusion of IFCs in all Bills, and the deduction of IFCs from tariffed
charges and all other charges from which the IFCs are to be deducted and
stated separately, including, without limitation, all charges under any
contracts with Customers who would, but for such contract, be paying
Applicable Rates, where such contract provides that the Customer will pay an
amount each billing period to the Grantee or the Note Issuer, or to the
Servicer, equal to the amount of IFCs that would have been billed if the
services provided under such contract were subject to Applicable Rates. The
Servicer shall follow such customary and usual practices and procedures as it
shall deem necessary or advisable in its servicing of all or any portion
ofthe Intangible Transition Property, which, in the Servicer's judgment, may
include the taking of legal action. Without limiting the foregoing, if the
Servicer determines at any time that the aggregate dollar amount of IFCs to
be imposed is reasonably likely to exceed the maximum dollar amount of
Intangible Transition Property authorized by the 1998 Transitional Funding
Order and any Subsequent Funding Orders to be imposed and collected and any
Notes remain outstanding, the Servicer shall make a good faith effort to take
any and all subsequent regulatory action with the ICC to obtain an order
expressly authorizing a larger dollar amount of Intangible Transition
Property in an amount sufficient to pay such Notes in full.
SECTION 3.03. CERTIFICATE OF COMPLIANCE. The Servicer shall deliver
to the Grantee, the Note Issuer, the Indenture Trustee and the Rating
Agencies on or before September 30 of each year, commencing September 30,
1999 to and including the September 30 succeeding the Retirement of the
Notes, an Officer's Certificate substantially in the form of EXHIBIT B hereto
(a "Certificate of Compliance"), stating that: (i) a review of the activities
of the Servicer during the twelve months ended the preceding June 30 (or, in
the case of the first Certificate of Compliance to be delivered on or before
September 30, 1999, the period of time from the date of this Agreement until
June 30,
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<PAGE>
1999) and of its performance under this Agreement has been made under such
officer's supervision, and (ii) to such officer's knowledge, based on such
review, the Servicer has fulfilled all of its obligations in all material
respects under this Agreement throughout such twelve months (or, in the case
of the Certificate of Compliance to be delivered on or before September 30,
1999, the period of time from the date of this Agreement until June 30,
1999), or, if there has been a default in the fulfillment of any such
material obligation, specifying each such material default known to such
officer and the nature and status thereof.
SECTION 3.04. ANNUAL REPORT BY INDEPENDENT PUBLIC ACCOUNTANTS.
(a) The Servicer, at its own expense in consideration of the Servicing
Fee paid to it, shall cause a firm of independent certified public
accountants (which may provide other services to the Servicer or Illinois
Power) to prepare, and the Servicer shall deliver to the Grantee, the Note
Issuer, the Indenture Trustee and the Rating Agencies a report addressed to
the Servicer (the "Annual Accountant's Report"), which may be included as
part of the Servicer's customary auditing activities, for the information and
use of the Grantee, the Note Issuer, the Indenture Trustee and the Rating
Agencies, on or before September 30 of each year, beginning September 30,
1999 to and including the September 30 succeeding the Retirement of the
Notes, to the effect that such firm has performed certain procedures in
connection with the Servicer's compliance with its obligations under this
Agreement during the preceding twelve months ended June 30 (or, in the case
of the first Annual Accountant's Report to be delivered on or before
September 30, 1999, the period of time from the date of this Agreement until
June 30, 1999), identifying the results of such procedures and including any
exceptions noted. If such accounting firm requires the Indenture Trustee to
agree or consent to the procedures performed by such firm, the Grantee shall
direct the Note Issuer to direct the
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Indenture Trustee in writing to so agree; it being understood and agreed
that the Indenture Trustee will deliver such letter of agreement or consent
in conclusive reliance upon the direction of the Note Issuer, and the
Indenture Trustee will not make any independent inquiry or investigation as
to, and shall have no obligation or liability in respect of the sufficiency,
validity or correctness of such procedures.
(b) The Annual Accountant's Report shall also indicate that the
accounting firm providing such report is independent of the Servicer within
the meaning of the Code of Professional Ethics of the American Institute of
Certified Public Accountants.
SECTION 3.05. OBLIGATIONS. The Servicer acknowledges and agrees that
to the fullest extent permitted by applicable law, its obligations under this
Agreement shall remain in effect notwithstanding any breach of the State
Pledge, whether or not contested, or subsequent invalidation of the Funding
Law or any Funding Order and/or any tariff or tariffs filed in connection
therewith, and that no such breach of the State Pledge or invalidation shall
act to excuse the Servicer from liability for any failure to perform its
covenants hereunder, including but not limited to its obligation to remit
IFCs and equivalent amounts for the benefit of the Holders, on account of any
legal inability stemming from such breach of the State Pledge or invalidation.
ARTICLE IV
SERVICES RELATED TO ADJUSTMENTS AND MONITORING OF THIRD-PARTY COLLECTORS
SECTION 4.01. ADJUSTMENTS. From time to time, until the Retirement of
the Notes, the Servicer shall identify the need for Adjustments and shall
take all reasonable action to obtain and implement such Adjustments, all in
accordance with the following:
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(a) EXPECTED AMORTIZATION SCHEDULE. The initial Expected Amortization
Schedule is attached hereto as SCHEDULE 4.01(a). In connection with the Note
Issuer's issuance of any additional Series of Notes after the Closing Date,
the Servicer, on or prior to the Series Issuance Date therefor, shall revise
the Expected Amortization Schedule to add the requisite information for each
new Series of Notes and set forth, as of each Payment Date through the
scheduled Retirement of the Notes, the aggregate principal amounts of the
Notes of all Series, including such additional Series, expected to be
outstanding on such Payment Date. The Servicer shall also, in accordance
with the requirements (if any) set forth in any Series Supplement or Trust
Issuance Certificate and otherwise in a manner reasonably acceptable to the
Grantee, revise the Expected Amortization Schedule to reflect any required
prepayments on account of the receipt of Allocable IFC Revenue Amounts or any
other required or permitted prepayments affecting such schedule. If the
Expected Amortization Schedule is revised as set forth above, the Servicer
shall send a copy of such revised Expected Amortization Schedule to the
Grantee, the Note Issuer, the Indenture Trustee and the Rating Agencies
promptly thereafter.
(b) ADJUSTMENTS
(i) ADJUSTMENTS AND FILINGS. Within the month following the
end of each Reconciliation Period, the Servicer shall: (A) update
the data and assumptions underlying the calculation of the IFCs,
including revenue from Applicable Rates for each class of
Customers, projected electricity usage during the next Applicable
Period for each such class and including interest and estimated
expenses and fees of the Grantee and the Note Issuer to be paid
during such period, and the rate of delinquencies and write-offs;
(B) determine the Required Debt Service and Debt
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Service Billing Requirement for the next Applicable Period based on
such updated data and assumptions; (C) determine the IFCs to be
allocated to each class of Customers during the next Applicable
Period based on such Debt Service Billing Requirement and the terms
of the applicable Funding Orders and the Tariffs filed pursuant
thereto (including, without limitation, the terms requiring that if
the forecasted revenues from Applicable Rates for any customer
class are projected to be less then the IFCs allocated to that
class, the deficiency will be ratably allocated to other classes);
(D) make all required notice and other filings with the ICC to
reflect the revised IFCs, including any Amendatory Tariffs required
under Section 18-104(k) of the Funding Law if the resulting IFCs
for any class of Customer will exceed an amount per kilowatt-hour
greater than the amount per kilowatt-hour authorized for such class
of Customer in the applicable Funding Order; and (E) take all
reasonable actions and make all reasonable efforts to effect such
Adjustment and to enforce the provisions of the Funding Law which
limit the ICC's authority to review any such Amendatory Tariff.
(ii) In the case of any Adjustment, the Servicer shall
implement the revised IFCs, if any, as of the next Adjustment Date.
(c) REPORTS.
(i) NOTIFICATION OF AMENDATORY TARIFF FILINGS AND
ADJUSTMENTS. Whenever the Servicer files an Amendatory Tariff with
the ICC or implements revised IFCs with notice to the ICC but
without filing an Amendatory Tariff or revisions to a Tariff as
contemplated by any applicable Funding Order, the Servicer
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shall send a copy of such filing or notice (together with a copy of
all notices and documents which, in the Servicer's reasonable
judgment, are material to the adjustments effected by such
Amendatory Tariff, revised Tariff or notice) to the Grantee, the
Note Issuer, the Indenture Trustee and the Rating Agencies
concurrently therewith.
(ii) QUARTERLY SERVICER'S CERTIFICATE. Not later than five
Servicer Business Days prior to each Payment Date, the Servicer
shall deliver a written report substantially in the form of EXHIBIT
D hereto (the "Quarterly Servicer's Certificate") to the Grantee,
the Note Issuer, the Indenture Trustee and the Rating Agencies.
(iii) REPORTS TO CUSTOMERS.
(A) After each revised IFC has gone into effect pursuant
to a Adjustment, the Servicer shall, to the extent and in the
manner and time frame required by applicable ICC Regulations,
if any, cause to be prepared and delivered to Customers any
required notices announcing such revised IFCs.
(B) In addition, at least once each year, the Servicer
shall (to the extent that it does not include the notice
described below in the Bills regularly sent to Customers)
cause to be prepared and delivered to Customers a notice
stating, in effect, that the IFCs are owned by the Grantee or
any assignee thereof and not Illinois Power. Such notice
shall be included either as an insert to or in the text of the
Bills delivered to such Customers or shall be delivered to
Customers by electronic means or such other means as the
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Servicer or the Applicable ARES may from time to time use to
communicate with their respective customers.
(C) Except to the extent that applicable ICC Regulations
make the Applicable ARES responsible for such costs or the
Applicable ARES has otherwise agreed to pay such costs, the
Servicer shall pay from its own funds all costs of preparation
and delivery incurred in connection with clauses (A) and (B)
above, including but not limited to printing and postage costs
as the same may increase or decrease from time to time.
(iv) ARES REPORTS. The Servicer shall provide to the Rating
Agencies, upon request, any publicly available reports filed by the
Servicer with the ICC (or otherwise made publicly available by the
Servicer) relating to ARES and any other non-confidential and
non-proprietary information relating to ARES reasonably requested
by the Rating Agencies.
SECTION 4.02. LIMITATION OF LIABILITY.
(a) The Grantee and the Servicer expressly agree and acknowledge that:
(i) In connection with any Adjustment, the Servicer is acting
solely in its capacity as the servicing agent hereunder.
(ii) Neither the Servicer nor the Grantee shall be responsible
in any manner for, and shall have no liability whatsoever as a
result of, any action, decision, ruling or other determination made
or not made, or any delay (other than any delay resulting from the
Servicer's failure to file the Amendatory Tariffs required by
Section 4.01 in a timely and correct manner or other breach by the
Servicer of its
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duties under this Agreement), by the ICC in any way related to the
Intangible Transition Property or in connection with any
Adjustment, the subject of any filings under Section 4.01, any
proposed Adjustment, or the approval of any revised IFCs.
(iii) The Servicer shall have no liability whatsoever relating
to the calculation of any revised IFCs, including as a result of
any inaccuracy of any of the assumptions made in such calculation
regarding expected energy usage volume and the rate of
delinquencies and write-offs, so long as the Servicer has acted in
good faith and has not acted in a grossly negligent manner in
connection therewith, nor shall the Servicer have any liability
whatsoever as a result of any Person, including the Holders, not
receiving any payment, amount or return anticipated or expected or
in respect of any Note generally, except only to the extent that
the same is caused by the Servicer's gross negligence, willful
misconduct, bad faith, or reckless disregard of its obligations and
duties under this Agreement.
(b) Notwithstanding the foregoing, this Section 4.02 shall not relieve the
Servicer of liability for any misrepresentation by the Servicer under Section
6.01 or for any breach by the Servicer of its other obligations under this
Agreement.
SECTION 4.03. MONITORING OF THIRD-PARTY COLLECTORS. From time to time,
until the Retirement of the Notes, the Servicer shall, in accordance with the
Servicing Standard, implement such procedures and policies as are necessary to
ensure that the obligations of all Third-Party Collectors to remit IFC Payments
are properly enforced in accordance with the terms and provisions of the
Tariffs. Such procedures and policies shall include the following:
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(a) MAINTENANCE OF RECORDS AND INFORMATION. In addition to any actions
required by ICC Regulations or other applicable law, the Servicer shall:
(i) maintain adequate records for promptly identifying and
contacting each such Third-Party Collector (including any ARES) and
for monitoring whether such Third-Party Collector is subject to the
Seven-Day Remittance Option, the Fifteen-Day Remittance Option, or
the Alternative Remittance Requirement;
(ii) maintain records of end-user Customers which are billed
by Third-Party Collectors to permit prompt reversion to
dual-billing in the event of default by a Third-Party Collector;
(iii) create and periodically update a record of the current
short-term and long-term unsecured debt ratings, if any, of each
Third-Party Collector which is responsible for billing IFCs
directly to end-user Customers and is obligated to remit IFC
Payments whether or not actually collected from end-user Customers
(and, where the IFC payment obligations of any Third-Party
Collector are guaranteed by another entity, the ratings of such
other entity);
(iv) create and periodically update, for each Third-Party
Collector which is responsible for billing IFCs directly to
end-user Customers and has elected the Fifteen-Day Remittance
Option or is otherwise obligated to remit IFCs whether or not IFC
Payments are actually collected from end-user Customers, estimates
of one month's estimated IFC collections and, in the case of any
such Third-Party Collector which does not have an unsecured debt
rating of at least BBB- or the equivalent,
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maintain a deposit or comparable credit security equal to such one
month's estimated IFC Collections as provided in the Tariffs.
The Servicer shall update the records described in clauses (iii) and (iv)
above no less frequently than (A) monthly in the case of any such
Third-Party Collector with expected monthly IFC billings of greater than
or equal to $5,000,000 and (B) quarterly in each other case.
(b) MONITORING OF PERFORMANCE AND PAYMENT. In addition to any actions
required by ICC Regulations or other applicable law, the Servicer shall
undertake to do the following:
(i) The Servicer shall require each Third-Party Collector
which has elected the Fifteen-Day Remittance Option or is otherwise
obligated to remit IFC Payments whether or not actually collected
from end-user Customers to pay all undisputed and disputed IFCs
billed to such Third-Party Collector, in accordance with the
provisions of the 1998 Initial Tariff and each Subsequent Tariff.
The Service shall monitor payment compliance for each Third-Party
Collector which has elected the Fifteen-Day Remittance Option or is
otherwise obligated to remit IFC Payments whether or not actually
collected from end-user Customers.
(ii) The Servicer shall, for each Third-Party Collector which
is responsible for billing IFCs directly to end-user Customers and
has elected the Seven-Day Remittance Option or is otherwise liable
to make IFC Payments only to the extent of collections actually
received from end-user Customers, compare (x) actual IFC
Collections from such Third-Party Collector to (y) estimated IFC
Collections therefrom. Such comparisons shall be made no less
frequently than:
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(A) Every five Servicer Business Days, in the case of any
such Third-Party Collector with expected monthly IFC billings of
greater than or equal to $5,000,000;
(B) Monthly in the case of any such Third-Party Collector
with expected monthly IFC billings of less than $5,000,000 but
greater than or equal to $1,000,000; and
(C) Quarterly in each other case.
If the discrepancy between actual IFC Collections and estimated IFC
Collections from any such Third-Party Collector, in the reasonable
judgment of the Servicer based upon historical experience and any
other information reasonably available thereto, indicates an actual or
impending default in such Third-Party Collector's remittance of IFC
Collections, the Servicer shall promptly notify such Third-Party
Collector in an attempt to determine the source of discrepancy. If,
following such notice, the source of any material discrepancy cannot
be identified, the Servicer shall, in accordance with ICC Regulations
and other applicable law and the Servicing Standard, take such steps
as it reasonably determines are necessary to verify whether or not the
applicable Third-Party Collector is in default.
(iii) The Servicer shall, consistent with its customary billing
practices, bill each Third-Party Collector who is obligated to pay
IFCs on behalf of end-user Customers for all IFCs owed by such
end-user Customers served thereby in accordance with the billing
cycle otherwise applicable to such end-user Customers.
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(c) ENFORCEMENT. The Servicer shall, in accordance with the terms of
the 1998 Initial Tariff and each Subsequent Tariff, ensure that each
Third-Party Collector remits the undisputed portions of the IFCs or IFC
Payments which it is obligated to remit to the Servicer and remits payment of
the disputed amount under protest (or makes some other suitable and agreeable
financial arrangements) pending a hearing on the matter. In the event of any
default by any Third-Party Collector, the Servicer shall enforce all rights
set forth in, and take all other steps permitted by, the 1998 Initial Tariff
or any Subsequent Tariff or other ICC Regulations as it determines, in
accordance with the Servicing Standard, are reasonably necessary to ensure
the prompt payment of IFCs by such Third-Party Collector and to preserve the
rights of the Holders with respect thereto, including, where appropriate,
taking such steps as it is permitted to take under applicable law to
terminate the right of any Third-Party Collector to bill and collect IFCs or
petitioning the ICC to impose such other remedies or penalties as may be
available under the circumstances. In the event any disputed IFCs billed are
resolved in favor of a Third-Party Collector and the Servicer becomes liable
for the payment of interest in respect of IFCs paid under protest or any
other penalty, the Servicer agrees that it will pay such interest or penalty
from the Servicing Fee paid to it or its other funds and shall not deduct
such interest or penalty amounts from IFC Collections.
(d) CREDIT AND COLLECTION POLICIES.
(i) The Servicer shall, to the full extent permitted under
the 1998 Funding Order or any Subsequent Funding Order, as
applicable, impose such terms with respect to credit and collection
policies applicable to Third-Party Collectors as may be reasonably
necessary to prevent the then current rating of the Notes from
being downgraded. The Servicer shall, in accordance with and to
the extent permitted by
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Section 16-118(b) of the Public Utilities Act and the terms of the
1998 Funding Order and any subsequent Funding Order, include and
impose the above-described terms in all tariffs filed under Section
16-118(b) of the Public Utilities Act which would allow ARES or
other utilities to issue single bills to Illinois Power's Customers
for services provided by such ARES or other utility and services
provided by Illinois Power. The Servicer shall periodically review
the need for modified or additional terms based upon, among other
things, (i) the relative amount of IFC Payments received through
Third-Party Collectors relative to the Debt Service Billing
Requirement, (ii) the historical payment and default experience of
each ARES and (iii) such other credit and collection policies to
which the ARES are subject, and will set out any such modified or
additional terms in a supplemental tariff filed with the ICC.
ARTICLE V
THE INTANGIBLE TRANSITION PROPERTY
SECTION 5.01. CUSTODY OF INTANGIBLE TRANSITION PROPERTY RECORDS. To
assure uniform quality in servicing the Intangible Transition Property and to
reduce administrative costs, the Grantee revocably appoints the Servicer, and
the Servicer accepts such appointment, to act as the agent of the Grantee, the
Note Issuer and the Indenture Trustee as custodian of any and all documents and
records that the Grantee shall keep on file, in accordance with its customary
procedures, relating to the Intangible Transition Property, including copies of
each Funding Order and all Tariffs relating thereto, and all documents filed
with the ICC in connection with any Adjustment (collectively, the
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"Intangible Transition Property Records"), which are hereby constructively
delivered to the Note Issuer, as transferee of the Grantee (or, in the case
of the Subsequent Intangible Transition Property, will as of the applicable
Subsequent Sale Date be constructively delivered to the Note Issuer, as
transferee of the Grantee) with respect to all Intangible Transition Property.
SECTION 5.02. DUTIES OF SERVICER AS CUSTODIAN.
(a) SAFEKEEPING. The Servicer shall hold the Intangible Transition
Property Records on behalf of the Grantee, the Note Issuer and the Indenture
Trustee, and maintain such accurate and complete accounts, records and
computer systems pertaining to the Intangible Transition Property Records as
shall enable the Grantee to comply with this Agreement and the Sale
Agreement, and as shall enable the Note Issuer to comply with the Sale
Agreement and the Indenture. Except with respect to the commingling of IFC
Collections expressly permitted hereunder, the Servicer shall keep all of the
Intangible Transition Property separate and apart from its other assets, and
shall maintain records with respect to the Intangible Transition Property
(including all IFC Collections) in a manner that facilitates the
identification and segregation of such assets from those of the Servicer.
The Servicer shall, in accordance with the remittance procedures described in
Annex I hereto, maintain records sufficient to permit the IFC Collections to
be accounted for separately from the funds with which they may be commingled,
so that the dollar amounts of IFC Collections commingled with the Servicer's
funds may be properly identified and traced. In performing its duties as
custodian the Servicer shall act with reasonable care, using that degree of
care and diligence that the Servicer exercises with respect to comparable
assets that the Servicer services for itself or, if applicable, for others.
The Servicer shall promptly report to the Grantee, the Note Issuer, the
Indenture Trustee and the Rating Agencies any failure on its part to hold the
Intangible Transition Property Records and
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maintain its accounts, records and computer systems as herein provided and
promptly take appropriate action to remedy any such failure. Nothing herein
shall be deemed to require an initial review or any periodic review by the
Grantee, the Note Issuer or the Indenture Trustee of the Intangible
Transition Property Records. The Servicer's duties to hold the Intangible
Transition Poperty Records on behalf of the Grantee, the Note Issuer and the
Indenture Trustee set forth in this Section 5.02, to the extent such
Intangible Transition Property Records have not been previously transferred
to a successor Servicer pursuant to Article VII, shall terminate three years
after the earlier of the date on which (i) the Servicer is succeeded by a
successor Servicer in accordance with Article VII hereof and (ii) no Notes of
any Series are Outstanding.
(b) MAINTENANCE OF AND ACCESS TO RECORDS. The Servicer shall maintain
the Intangible Transition Property Records at 500 South 27th Street, Decatur,
Illinois 62525, or at such other office as shall be specified to the Grantee,
the Note Issuer and the Indenture Trustee by written notice at least 30 days
prior to any change in location. The Servicer shall permit the Grantee, the
Note Issuer and the Indenture Trustee or their respective duly authorized
representatives, attorneys or auditors to inspect, audit and make copies of
and abstracts from the Servicer's records regarding the Intangible Transition
Property and the IFCs (including all the Intangible Transition Property
Records), at such times during normal business hours as the Grantee, the Note
Issuer or the Indenture Trustee shall reasonably request and which do not
unreasonably interfere with the Servicer's normal operations. Nothing in
this Section 5.02(b) shall affect the obligation of the Servicer to observe
any applicable law (including any ICC Regulations) prohibiting disclosure of
information regarding the Customers, and the failure of the Servicer to
provide access to such information as a result of such obligation shall not
constitute a breach of this Section 5.02(b).
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(c) DEFENDING INTANGIBLE TRANSITION PROPERTY AGAINST CLAIMS. The
Servicer shall institute any action or proceeding necessary to compel
performance by the ICC or the State of Illinois of any of their obligations
or duties under the Funding Law, any Funding Order or any Tariff and the
Servicer agrees to take such legal or administrative actions, including
defending against or instituting and pursuing legal actions and appearing or
testifying at hearings or similar proceedings, as may be reasonably necessary
to block or overturn any attempts to cause a repeal of, modification of or
supplement to or judicial invalidation of, the Amendatory Act, the Funding
Law or any Funding Order or the rights of holders of Intangible Transition
Property, or the promulgation of any ICC Regulations, by legislative action
or otherwise, that would be adverse to the Grantee, the Note Issuer or any
Holders. The Servicer shall continue to impose IFCs (or equivalent amounts),
collect IFCs (or equivalent amounts), and remit IFCs (or equivalent amounts),
in accordance with this Agreement and to ensure that the IFCs (or equivalent
amounts) are deducted from Illinois Power's Applicable Rates and other
charges in accordance with the Basic Documents continuing until the
Retirement of the Notes, in each such case unless otherwise prohibited by law
or by any court or regulatory order in effect at such time. The Servicer
shall advance its own funds in order to institute any actions or proceedings
described above, PROVIDED, HOWEVER, that the costs of any such action or
proceeding shall be payable from IFC Collections as an Operating Expense in
accordance with the priorities set forth in Section 8.02(d) of the Indenture.
The Servicer's obligations pursuant to this Section 5.02 shall survive and
continue notwithstanding the fact that the payment of Operating Expenses
pursuant to Section 8.02(d) of the Indenture may be delayed (it being
understood that the Servicer may be required to advance its own funds to
satisfy its obligations hereunder).
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SECTION 5.03. INSTRUCTIONS; AUTHORITY TO ACT. For so long as any
Notes remain Outstanding, the Servicer shall be deemed to have received
proper instructions with respect to the Intangible Transition Property
Records upon its receipt of written instructions signed by a Responsible
Officer of the Indenture Trustee.
SECTION 5.04. CUSTODIAN'S INDEMNIFICATION. The Servicer as custodian
shall indemnify the Grantee, the Note Issuer, the Delaware Trustee, the
Indenture Trustee and the Holders and each of their respective officers,
directors, employees and agents for, and defend and hold harmless each such
Person from and against, any and all liabilities, obligations, losses,
damages, payments and claims, and reasonable costs or expenses, of any kind
whatsoever (collectively, "Losses") that may be imposed on, incurred by or
asserted against any such Person as the result of any improper act or
omission in any way relating to the maintenance and custody by the Servicer,
as custodian, of the Intangible Transition Property Records; PROVIDED,
HOWEVER, that the Servicer shall not be liable for any portion of any such
amount resulting from the willful misconduct, bad faith or gross negligence
of the Grantee, the Note Issuer, the Delaware Trustee, the Indenture Trustee
or any Holders.
Indemnification under this Section shall survive resignation or removal
of the Indenture Trustee or the Delaware Trustee and shall include reasonable
out-of-pocket fees and expenses of investigation and litigation.
SECTION 5.05. EFFECTIVE PERIOD AND TERMINATION. The Servicer's
appointment as custodian shall become effective as of the Closing Date and
shall continue in full force and effect until terminated pursuant to this
Section. If any Servicer shall resign as Servicer in accordance with the
provisions of this Agreement or if all of the rights and obligations of any
Servicer shall have been
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terminated under Section 7.01, the appointment of such Servicer as custodian
shall be terminated by the Indenture Trustee or by the Holders of Notes
evidencing not less than twenty-five percent (25%) of the Outstanding Amount
of the Notes of all Series in the same manner as the Indenture Trustee or
such Holders may terminate the rights and obligations of the Servicer under
Section 7.01.
SECTION 5.06. GENERAL INDEMNIFICATION OF INDENTURE TRUSTEE AND
DELAWARE TRUSTEE. The Servicer agrees to indemnify and hold harmless the
Indenture Trustee and the Delaware Trustee and their respective directors,
officers, employees and agents from and against any and all Losses incurred
by or asserted against any such Person as a result of or in connection with
the transactions contemplated by this Agreement or any other Basic Document,
other than any Loss incurred by reason or result of the gross negligence or
willful misconduct of the Indenture Trustee or the Delaware Trustee;
PROVIDED, HOWEVER, that the foregoing indemnity is extended to the Indenture
Trustee and the Delaware Trustee solely in their respective capacities as
trustees and not for the benefit of the Holders or any other Person. The
obligations of the Servicer set forth herein shall survive the termination of
this Agreement or the earlier resignation or removal of the Indenture Trustee
under the Indenture or the Delaware Trustee under the Trust Agreement.
ARTICLE VI
THE SERVICER
SECTION 6.01. REPRESENTATIONS AND WARRANTIES OF SERVICER. The
Servicer makes the following representations and warranties, as of the
Closing Date, as of each Subsequent Sale Date relating to the sale of
Subsequent Intangible Transition Property pursuant to a Subsequent Sale
Agreement, and as of such other dates as expressly provided in this Section
6.01, on which the
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Grantee is deemed to have relied in entering into this Agreement. The
representations and warranties shall survive the execution and delivery of
this Agreement, the transfer of this Agreement to the Note Issuer pursuant to
the Sale Agreement and the pledge thereof to the Indenture Trustee pursuant
to the Indenture.
(a) ORGANIZATION AND GOOD STANDING. The Servicer is duly organized and
validly existing as a corporation in good standing under the laws of the
state of its incorporation, with the power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is presently conducted, and had at all relevant times, and
has, the requisite power, authority and legal right to service the Intangible
Transition Property and to hold the Intangible Transition Property Records as
custodian.
(b) DUE QUALIFICATION. The Servicer is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals in, all jurisdictions in which the ownership or lease
of property or the conduct of its business (including the servicing of the
Intangible Transition Property as required by this Agreement) shall require
such qualifications, licenses or approvals (except where the failure to so
qualify would not be reasonably likely to have a material adverse effect on
the Servicer's business, operations, assets, revenues or properties or
adversely affect the servicing of the Intangible Transition Property).
(c) POWER AND AUTHORITY. The Servicer has the requisite power and
authority to execute and deliver this Agreement and to carry out its terms;
and the execution, delivery and performance of this Agreement have been duly
authorized by the Servicer by all necessary corporate action.
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(d) BINDING OBLIGATION. This Agreement constitutes a legal, valid and
binding obligation of the Servicer enforceable in accordance with its terms,
subject to applicable insolvency, reorganization, moratorium, fraudulent
transfer and other similar laws relating to or affecting creditors' rights
generally from time to time in effect and to general principles of equity
(including, without limitation, concepts of materiality, reasonableness, good
faith and fair dealing), regardless of whether considered in a proceeding in
equity or at law.
(e) NO VIOLATION. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof do not (i) conflict with,
result in any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time) a default under, the articles of
incorporation or bylaws of the Servicer, or any indenture, agreement or other
instrument to which the Servicer is a party or by which it shall be bound; (ii)
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other instrument; or
(iii) violate any law or any order, rule or regulation applicable to the
Servicer of any court or of any Federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over the
Servicer or its properties.
(f) NO PROCEEDINGS. Except as set forth on Schedule 6.01(f), there are no
proceedings or investigations pending or, to the Servicer's knowledge,
threatened before any court, Federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over the
Servicer or its properties involving or relating to the Servicer or the Grantee
or, to the Servicer's knowledge, any other Person: (i) asserting the invalidity
of this Agreement, or any of the other Basic Documents or the Notes, (ii)
seeking to prevent the issuance of the Notes or the consummation of any of the
transactions contemplated by this Agreement or any of the other Basic
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Documents, (iii) seeking any determination or ruling that could reasonably be
expected to materially and adversely affect the performance by the Servicer
of its obligations under, or the validity or enforceability of this
Agreement, any of the other Basic Documents or the Notes, or (iv) relating to
the Servicer and which could reasonably be expected to adversely affect the
Federal or state income tax attributes of the Notes.
(g) APPROVALS. No approval, authorization, consent, order or other action
of, or filing with, any court, Federal or state regulatory body, administrative
agency or other governmental instrumentality is required in connection with the
Servicer's execution and delivery of this Agreement, the Servicer's performance
of the transactions contemplated hereby or the Servicer's fulfillment of the
terms hereof, except those that have been obtained or made and those that the
Servicer is required to make in the future pursuant to Article IV hereof.
(h) CALCULATIONS AND ASSUMPTIONS. The calculations and assumptions used
by the Servicer in calculating the IFCs in effect from time to time are
reasonable and made in good faith.
(i) REPORTS AND CERTIFICATES. Each report and certificate delivered in
connection with a Tariff will constitute a representation and warranty by the
Servicer that each such report or certificate, as the case may be, is true and
correct; PROVIDED, HOWEVER, that to the extent any such report or certificate is
based in part upon or contains assumptions, forecasts or other predictions of
future events, the representation and warranty of the Servicer with respect
thereto will be limited to the representation and warranty that such
assumptions, forecasts or other predictions of future events are reasonable
based upon historical performance and other pertinent information.
SECTION 6.2. INDEMNITIES OF SERVICER; RELEASE OF CLAIMS.
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(a) The Servicer shall be liable in accordance herewith only to the extent
of the obligations specifically undertaken by the Servicer under this Agreement.
(b) The Servicer shall indemnify the Grantee, the Note Issuer, the
Indenture Trustee, the Delaware Trustee and the Holders and each of their
respective officers, directors, employees and agents for, and defend and hold
harmless each such Person from and against, any and all Losses that may be
imposed on, incurred by or asserted against any such Person as a result of (i)
the Servicer's willful misconduct, bad faith or gross negligence in the
performance of its duties or observance of its covenants under this Agreement or
its reckless disregard of its obligations and duties under this Agreement, or
(ii) the Servicer's breach of any of its representations or warranties in this
Agreement.
(c) For purposes of Section 6.02(b), in the event of the termination of
the rights and obligations of Illinois Power (or any successor thereto pursuant
to Section 6.03) as Servicer pursuant to Section 7.01, or a resignation by such
Servicer pursuant to this Agreement, such Servicer shall be deemed to be the
Servicer pending appointment of a successor Servicer pursuant to Section 7.02.
(d) Indemnification under Section 6.02 shall survive any repeal of,
modification of, supplement to, or judicial invalidation of, the Funding Law or
any Funding Order, shall survive the resignation or removal of the Indenture
Trustee or the Delaware Trustee or the termination of this Agreement and shall
include reasonable out-of-pocket fees and expenses of investigation and
litigation (including reasonable attorneys' fees and expenses incurred by any
indemnified party).
(e) Except to the extent expressly provided in this Agreement or the other
Basic Documents (including, without limitation, the Servicer's claims with
respect to the Servicing Fee, reimbursement for costs incurred pursuant to
Section 5.02(c) and the payment of the consideration for any grant of Intangible
Transition Property to the Grantee), the Servicer releases and discharges
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the Grantee, the Note Issuer, the Delaware Trustee and the Indenture Trustee
and each of their respective officers, directors and agents (collectively,
the "Released Parties") from any and all actions, claims and demands
whatsoever, whenever arising, which the Servicer, in its capacity as Servicer
or otherwise, shall or may have against any such Person relating to the
Intangible Transition Property or the Servicer's activities with respect
thereto other than any actions, claims and demands arising out of the willful
misconduct, bad faith or gross negligence of the Released Parties.
SECTION 6.3. MERGER OR CONSOLIDATION OF OR ASSUMPTION OF THE OBLIGATIONS
OF SERVICER. Any Person (a) into which the Servicer may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Servicer shall be a party or (c) which may succeed to the properties and assets
of the Servicer substantially as a whole, or, with respect to its obligations as
Servicer, which Person in any of the foregoing cases executes an agreement of
assumption to perform every obligation of the Servicer hereunder, shall be the
successor to the Servicer under this Agreement without further act on the part
of any of the parties to this Agreement; PROVIDED, HOWEVER, that (i) immediately
after giving effect to such transaction, no Servicer Default and no event which,
after notice or lapse of time, or both, would become a Servicer Default shall
have occurred and be continuing, (ii) the Servicer shall have delivered to the
Grantee, the Note Issuer, the Indenture Trustee and the Rating Agencies an
Officers' Certificate and an Opinion of Counsel each stating that such
consolidation, merger or succession and such agreement of assumption complies
with this Section and that all conditions precedent provided for in this
Agreement relating to such transaction have been complied with and (iii) the
Servicer shall have delivered to the Grantee, the Note Issuer, the Indenture
Trustee and the Rating Agencies an Opinion of Counsel either (A) stating that,
in the opinion of such counsel, all filings to be made by the
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Servicer, including filings with the ICC pursuant to the Funding Law, have
been executed and filed that are necessary to preserve and protect fully the
interests of the Grantee in the Intangible Transition Property and reciting
the details of such filings or (B) stating that, in the opinion of such
counsel, no such action shall be necessary to preserve and protect such
interests. Notwithstanding anything herein to the contrary, the execution of
the foregoing agreement of assumption and compliance with clauses (i), (ii)
and (iii) above shall be conditions to the consummation of the transactions
referred to in clauses (a), (b) or (c) above.
SECTION 6.04. LIMITATION ON LIABILITY OF SERVICER AND OTHERS. Neither
the Servicer nor any of the directors or officers or employees or agents of
the Servicer shall be liable to the Grantee, the Note Issuer, the Indenture
Trustee, the Delaware Trustee, the Holders or any other Person, except as
provided under this Agreement, for any action taken or for refraining from
the taking of any action pursuant to this Agreement or for errors in
judgment; PROVIDED, HOWEVER, that this provision shall not protect the
Servicer or any such person against any liability that would otherwise be
imposed by reason of willful misconduct, bad faith or gross negligence in the
performance of the Servicer's duties or by reason of reckless disregard of
the Servicer's obligations and duties. The Servicer and any director or
officer or employee or agent of the Servicer may rely in good faith on the
advice of counsel reasonably acceptable to the Indenture Trustee or on any
document of any kind, PRIMA FACIE properly executed and submitted by any
Person, respecting any matters arising under this Agreement.
SECTION 6.05. ILLINOIS POWER NOT TO RESIGN AS SERVICER. Subject to the
provisions of Sections 6.03, Illinois Power shall not resign from the
obligations and duties hereby imposed on it as Servicer under this Agreement
unless either (a) the Servicer determines that the performance
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of its duties under this Agreement shall no longer be permissible under
applicable law (disregarding any breach of the State Pledge that is being
contested or subsequent invalidation of the Funding Law, any Funding Order
and/or any Tariff or Tariffs filed in connection therewith), or (b) the
Rating Agency Condition shall have been satisfied and, in either such case,
to the extent required under any Funding Order, the ICC shall have approved
such resignation. Notice of any such determination permitting Illinois
Power's resignation shall be given to the Grantee, the Note Issuer, the
Indenture Trustee and the Rating Agencies at the earliest practicable time
(and, if such communication is not in writing, shall be confirmed in writing
at the earliest practicable time) and any such determination shall be
evidenced by an Opinion of Counsel to such effect delivered to the Grantee,
the Note Issuer and the Indenture Trustee concurrently with or promptly after
such notice. No such resignation shall become effective until a successor
Servicer shall have assumed Illinois Power's responsibilities and obligations
in accordance with Section 7.02.
SECTION 6.06. SERVICING COMPENSATION.
(a) In consideration for its services hereunder, until the Retirement of
the Notes, the Servicer shall receive a fee (the "Servicing Fee") quarterly on
each Payment Date in an amount (i) equal to $540,000 for so long as IFCs are
billed concurrently with charges or otherwise billed to Customers or (ii) not to
exceed $3,240,000 if IFCs are not billed concurrently with charges otherwise
billed to Customers but, instead, are billed separately to Customers. The
Servicer shall also be entitled to retain as additional compensation (i) any
interest earnings on IFC Payments received by the Servicer and invested by the
Servicer pursuant to Section 6(d) of Annex I hereto during each Collection
Period prior to remittance to the Collection Account and (ii) all late payment
charges, if any, collected from Customers or ARES. So long as the Servicer is
billing Customers for charges
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for electric service or any Applicable Rates, the Servicer will bill IFCs to
such Customers concurrently with such other charges and such Applicable Rates.
(b) The Servicer shall receive, in accordance with Section 8.02 of the
Indenture, the Servicing Fee set forth in Section 6.06(a) above on each Payment
Date in accordance with the priorities set forth in Section 8.02(d) of the
Indenture, by wire transfer of immediately-available funds from the Collection
Account to an account designated by the Servicer. Any portion of the Servicing
Fee not paid on such date shall be added to the Servicing Fee payable on the
subsequent Payment Date.
(c) Except as provided in Section 5.02(c), the Servicer shall be required
to pay from its own account all expenses incurred by it in connection with its
activities hereunder (including any fees to and disbursements by accountants,
counsel, or any other Person, any taxes imposed on the Servicer and any expenses
incurred in connection with reports to Holders) out of the compensation retained
by or paid to it pursuant to this Section 6.06, and shall not be entitled to any
extra payment or reimbursement therefor.
SECTION 6.07. COMPLIANCE WITH APPLICABLE LAW. The Servicer covenants
and agrees, in servicing the Intangible Transition Property, to comply with
all laws applicable to, and binding upon, the Servicer and relating to such
Intangible Transition Property the noncompliance with which would have a
material adverse effect on the value of the Intangible Transition Property;
PROVIDED, HOWEVER, that the foregoing is not intended to, and shall not,
impose any liability on the Servicer for noncompliance with any law that the
Servicer is contesting in good faith in accordance with its customary
standards and procedures.
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SECTION 6.08. ACCESS TO CERTAIN RECORDS AND INFORMATION REGARDING
INTANGIBLE TRANSITION PROPERTY. The Servicer shall provide to the Grantee,
the Note Issuer, the Indenture Trustee and the Holders access to the
Intangible Transition Property Records in such cases where the Grantee, the
Note Issuer, the Indenture Trustee and the Holders shall be required by
applicable law to be provided access to such records. Access shall be
afforded without charge, but only upon reasonable request and during normal
business hours at the offices of the Servicer. Nothing in this Section shall
affect the Servicer's obligation to observe any applicable law (including any
ICC Regulation) prohibiting disclosure of information regarding the
Customers, and the failure of the Servicer to provide access to such
information as a result of such obligation shall not constitute a breach of
this Section.
SECTION 6.09. APPOINTMENTS. The Servicer may at any time appoint any
Person to perform all or any portion of its obligations as Servicer
hereunder; PROVIDED, HOWEVER, that, unless such person is Illinova
Corporation or a wholly-owned subsidiary thereof, the Rating Agency Condition
shall have been satisfied in connection therewith; PROVIDED FURTHER that the
Servicer shall remain obligated and be liable to the Grantee, the Note
Issuer, the Indenture Trustee and the Holders for the servicing and
administering of the Intangible Transition Property in accordance with the
provisions hereof without diminution of such obligation and liability by
virtue of the appointment of such Person and to the same extent and under the
same terms and conditions as if the Servicer alone were servicing and
administering the Intangible Transition Property; and PROVIDED FURTHER,
HOWEVER, that nothing herein (including, without limitation, the Rating
Agency Condition) shall preclude the execution by the Servicer of an ARES
Service Agreement with any ARES pursuant to applicable ICC Regulations. The
fees and expenses of such Person shall be as agreed between the
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Servicer and such Person from time to time and none of the Grantee, the Note
Issuer, the Indenture Trustee, the Holders or any other Person shall have any
responsibility therefor or right or claim thereto. No such appointment shall
constitute a Servicer resignation under Section 6.05.
SECTION 6.10. NO SERVICER ADVANCES. The Servicer shall not make any
advances of interest or principal on the Notes.
SECTION 6.11. REMITTANCES.
(a) Subject to clause (b) below, on each Servicer Business Day, the
Servicer shall remit to the General Subaccount of the Collection Account the
total IFC Payments collected by the Servicer from or on behalf of Customers on
the second preceding Servicer Business Days (the "Daily Remittance"), which
Daily Remittance shall be determined according to the procedures set forth in
Annex I. Prior to each remittance to the General Subaccount of the Collection
Account pursuant to this Section, the Servicer shall provide written notice to
the Indenture Trustee of each such remittance (including the exact dollar amount
to be remitted).
(b) Notwithstanding the foregoing clause (a), unless a Servicer Default
has occurred and is continuing or if the Rating Agency Condition is not
satisfied, during any period in which the Servicer maintains a short-term
rating of A-1 or better by Standard & Poor's, P-1 or better by Moody's, (if
rated by Duff & Phelps) D-1 or better by Duff & Phelps and (if rated by Fitch
IBCA) F-1 or better by Fitch IBCA, the Servicer shall no longer be required
to make Daily Remittances, and, in lieu thereof, the Servicer shall, on each
Monthly Remittance Date, cause to be made a wire transfer of immediately
available funds equal to the Aggregate Remittance Amount for the applicable
Billing Period to the General Subaccount of the Collection Account.
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(c) The Servicer agrees and acknowledges that it holds all IFC Payments
collected by it for the benefit of the Grantee or the Note Issuer, as
applicable, and that all such amounts shall be remitted by the Servicer in
accordance with this Section without any surcharge, fee, offset, charge or other
deduction except for late fees permitted by Section 6.06. The Servicer shall
not make any claim to reduce its obligation to remit all IFC Payments collected
by it in accordance with this Agreement except for late fees permitted by
Section 6.06.
(d) Unless otherwise directed to do so by the Note Issuer, the Servicer
shall be responsible for selecting Eligible Investments in which the funds in
the Collection Account shall be invested pursuant to Section 8.03 of the
Indenture.
SECTION 6.12. COMPLIANCE WITH SERVICING STANDARD; CHANGES IN ICC TARIFFS.
The Servicer shall, with respect to its duties hereunder, comply at all times
with the Servicing Standard, and, so long as any of the Notes are outstanding,
shall not initiate any material changes with respect to its policies and
procedures pertaining to credit (including requirements for deposits from
Customers), billing, collections (including procedures for disconnection of
service for non-payment) and restoration of service after disconnection, and
shall not, except as required by applicable law, initiate any changes in any ICC
tariffs relating to the foregoing which are reasonably likely to materially and
adversely affect the Servicer's ability to make timely recovery of amounts
billed to Customers. Notwithstanding the foregoing, the Servicer may, in its
own discretion, waive any late payment charge or any other fee or charge
relating to delinquent payments, if any, and may waive, vary or modify any terms
of payment of any amounts payable by a Customer, in each case, if such waiver or
action (a) would be in accordance with the Servicer's customary practices or
those of any successor Servicer with respect to comparable assets that it
services for itself, (b) would not
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materially adversely affect the Holders and (c) would comply with applicable
law. In addition, the Servicer may write off any amounts that it deems
uncollectible in accordance with its customary practices.
ARTICLE VII
DEFAULT
SECTION 7.01. SERVICER DEFAULT. If any one of the following events (a
"Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to deposit in the Collection Account on
behalf of the Grantee any required remittance that shall continue unremedied for
a period of three Business Days after written notice of such failure is received
by the Servicer from the Grantee, the Note Issuer or the Indenture Trustee or
after discovery of such failure by a Responsible Officer of the Servicer; or
(b) any failure on the part of the Servicer or Illinois Power, as the case
may be, duly to observe or to perform in any material respect any other covenant
or agreement of the Servicer or Illinois Power (as the case may be) set forth in
this Agreement (including Section 4.01) or any other Basic Document to which it
is a party, which failure shall (i) materially and adversely affect the rights
of the Holders and (ii) continue unremedied for a period of 30 days after the
date on which written notice of such failure, requiring the same to be remedied,
shall have been given (A) to the Servicer or Illinois Power (as the case may be)
by the Grantee or the Note Issuer or (B) to the Servicer or Illinois Power (as
the case may be) by the Indenture Trustee or by the Holders of Notes evidencing
not less than twenty-five percent (25%) of the Outstanding Amount of the Notes
of all Series; or
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(c) any representation or warranty made by the Servicer in this Agreement
shall prove to have been incorrect when made, which has a material adverse
effect on the Grantee, the Note Issuer or the Holders and which material adverse
effect continues unremedied for a period of 60 days after the date on which
written notice thereof requiring the same to be remedied, shall have been
delivered to the Servicer by the Grantee, the Note Issuer or the Indenture
Trustee; or
(d) an Insolvency Event occurs with respect to the Servicer or Illinois
Power; then, and in each and every case, so long as the Servicer Default
shall not have been remedied, either the Indenture Trustee, or the Holders of
Notes evidencing not less than twenty-five percent (25%) of the Outstanding
Amount of the Notes of all Series, by notice (a "Termination Notice") then
given in writing to the Servicer (and to the Indenture Trustee if given by
the Holders) may terminate all the rights and obligations (other than the
obligations set forth in Section 6.02 hereof) of the Servicer under this
Agreement. In addition, upon a Servicer Default described in Section
7.01(a), each of the following shall be entitled to apply to the ICC for
sequestration and payment of revenues arising with respect to the Intangible
Transition Property: (1) the Holders and the Indenture Trustee as
beneficiaries of the lien provided under Section 18-107(c) of the Funding
Law; (2) the Grantee or its assignees; (3) the Note Issuer; or (4) pledges or
transferees of the Intangible Transition Property. On or after the receipt
by the Servicer of a Termination Notice, all authority and power of the
Servicer under this Agreement, whether with respect to the Notes, the
Intangible Transition Property, the IFCs or otherwise, shall, without further
action, pass to and be vested in such successor Servicer as may be appointed
under Section 7.02; and, without limitation, the Indenture Trustee is
authorized and empowered to execute and deliver, on behalf of the predecessor
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or
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things necessary or appropriate to effect the purposes of such Termination
Notice, whether to complete the transfer of the Intangible Transition
Property Records and related documents, or otherwise. The predecessor
Servicer shall cooperate with the successor Servicer, the Grantee, the Note
Issuer and the Indenture Trustee in effecting the termination of the
responsibilities and rights of the predecessor Servicer under this Agreement,
including the transfer to the successor Servicer for administration by it of
(i) all cash amounts that shall at the time be held by the predecessor
Servicer for remittance, or shall thereafter be received by it with respect
to the Intangible Transition Property or the IFCs, and (ii) any and all
Intangible Transition Property Records. All reasonable out-of-pocket costs
and expenses (including attorneys' fees and expenses) incurred in connection
with transferring the Intangible Transition Property Records to the successor
Servicer and amending this Agreement to reflect such succession as Servicer
pursuant to this Section shall be paid by the predecessor Servicer upon
presentation of reasonable documentation of such costs and expenses.
SECTION 7.02. APPOINTMENT OF SUCCESSOR.
(a) Upon the Servicer's receipt of a Termination Notice pursuant to
Section 7.01 or the Servicer's resignation or removal in accordance with the
terms of this Agreement, the predecessor Servicer shall continue to perform
its functions as Servicer under this Agreement, and shall be entitled to
receive the requisite Servicing Fee, until a successor Servicer shall have
assumed in writing the obligations of the Servicer hereunder as described
below. In the event of the Servicer's termination hereunder, the Note Issuer
shall appoint a successor Servicer with the Grantee's prior written consent
thereto (which consent shall not be unreasonably withheld), and the successor
Servicer shall accept its appointment by a written assumption in form
acceptable to the Grantee and the Note Issuer and provide prompt notice of
such assumption to the Indenture Trustee and the
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Rating Agencies. If within 30 days after the delivery of the Termination
Notice, the Note Issuer shall not have obtained such a new Servicer, the
Indenture Trustee may petition the ICC or a court of competent jurisdiction
to appoint a successor Servicer under this Agreement. A Person shall qualify
as a successor Servicer only if (i) such Person is permitted under and ICC
Regulations to perform the duties of the Servicer, (ii) the Rating Agency
Condition shall have been satisfied and (iii) such Person enters into a
servicing agreement with the Grantee having substantially the same provisions
as this Agreement.
(b) Upon appointment, the successor Servicer shall be the successor in
all respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties and liabilities arising thereafter relating thereto
placed on the predecessor Servicer and shall be entitled to the Servicing Fee
and all the rights granted to the predecessor Servicer by the terms and
provisions of this Agreement.
SECTION 7.03. WAIVER OF PAST DEFAULTS. The Holders of Notes
evidencing not less than a majority of the Outstanding Amount of the Notes of
all Series may, on behalf of all Holders, waive in writing any default by the
Servicer in the performance of its obligations hereunder and its
consequences, except a default in making any required deposits to the
Collection Account in accordance with this Agreement, which waiver shall
require the consent of all Holders. Upon any such waiver of a past default,
such default shall cease to exist, and any Servicer Default arising therefrom
shall be deemed to have been remedied for every purpose of this Agreement.
No such waiver shall extend to any subsequent or other default or impair any
right consequent thereto.
SECTION 7.04. NOTICE OF SERVICER DEFAULT. The Servicer shall deliver
to the Grantee, the Note Issuer, the Indenture Trustee and the Rating
Agencies, promptly after having obtained
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knowledge thereof, but in no event later than five Business Days thereafter,
written notice in an Officer's Certificate of any event which with the giving
of notice or lapse of time, or both, would become a Servicer Default under
Section 7.01(a) or (b).
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.01. AMENDMENT.
(a) This Agreement may be amended in writing by the Servicer and the
Grantee with five Business Days' prior written notice given to the Rating
Agencies and the prior written consent of the Indenture Trustee, but without
the consent of any of the Holders or Holders, to cure any ambiguity, to
correct or supplement any provisions in this Agreement or for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions in this Agreement or of modifying in any manner the rights of the
Holders; PROVIDED, HOWEVER, that such action shall not, as evidenced by an
Officer's Certificate delivered to the Grantee, the Note Issuer, the Delaware
Trustee and the Indenture Trustee, adversely affect in any material respect
the interests of any Holder.
This Agreement may also be amended in writing from time to time by the
Servicer and the Grantee with prior written notice given to the Rating
Agencies and the prior written consent of the Indenture Trustee and the prior
written consent of the Holders of Notes evidencing not less than a majority
of the Outstanding Amount of the Notes of all Series, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the
Holders; PROVIDED, HOWEVER, that no such amendment
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shall (a) increase or reduce in any manner the amount of, or accelerate or
delay the timing of, IFC Collections, or the timing of adjustments to IFCs,
or (b) reduce the aforesaid percentage of the Outstanding Amount of the
Notes, the Holders of which are required to consent to any such amendment,
without the consent of the Holders of all the outstanding Notes.
Promptly after the execution of any such amendment and the requisite
consents, the Grantee shall furnish written notification of the substance of
such amendment to the Note Issuer, the Indenture Trustee and each of the Rating
Agencies.
It shall not be necessary for the consent of Holders pursuant to this
Section to approve the particular form of any proposed amendment or consent, but
it shall be sufficient if such consent shall approve the substance thereof.
Prior to its consent to any amendment to this Agreement, the Indenture
Trustee shall be entitled to receive and conclusively rely upon an Opinion of
Counsel stating that such amendment is authorized or permitted by this
Agreement. The Indenture Trustee may, but shall not be obligated to, enter into
any such amendment which affects the Indenture Trustee's own rights, duties,
indemnities or immunities under this Agreement or otherwise.
(b) Notwithstanding Section 8.01(a) or anything to the contrary in this
Agreement, the Servicer and the Grantee may amend Annex I to this Agreement in
writing with prior written notice given to the Indenture Trustee and the Rating
Agencies, but without the consent of the Indenture Trustee, any Rating Agency or
any Holder, solely to address changes to the Servicer's method of calculating
IFC Payments received as a result of changes to the Servicer's current
computerized customer information system; PROVIDED that any such amendment shall
not have a material adverse effect on the Holders.
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SECTION 8.02. MAINTENANCE OF RECORDS. The Servicer shall maintain
accounts and records as to the Intangible Transition Property accurately and
in accordance with its standard accounting procedures and in sufficient
detail to permit reconciliation between IFC Payments received by the Servicer
and IFC Collections from time to time deposited in the Collection Account.
SECTION 8.03. NOTICES. All demands, notices and communications upon
or to the Servicer, the Grantee, the Note Issuer, the Indenture Trustee or
the Rating Agencies under this Agreement shall be in writing and personally
delivered, sent by overnight mail or sent by telecopy or other similar form
of rapid transmission, and shall be deemed to have been duly given upon
receipt (a) in the case of the Servicer, to Illinois Power Company, 500 South
27th Street, Decatur, Illinois 62525; (b) in the case of the Grantee, to
Illinois Power Securitization Limited Liability Company, c/o Illinois Power
Company, 500 South 27th Street, Decatur, Illinois 62525; (c) in the case of
the Note Issuer, to Illinois Power Special Purpose Trust, c/o First Union
Trust Company, National Association, as Delaware Trustee, One Rodney Square,
920 King Street, 1st Floor, Wilmington, Delaware 19801, Attention: Corporate
Trust Administration; (d) in the case of the Indenture Trustee, at the
Corporate Trust Office; (e) in the case of Moody's, to Moody's Investors
Service, Inc., ABS Monitoring Department, 99 Church Street, New York, New
York 10007; (f) in the case of Standard & Poor's, to Standard & Poor's
Corporation, 26 Broadway (10th Floor), New York, New York 10004, Attention of
Asset Backed Surveillance Department; (g) in the case of Fitch IBCA, to Fitch
IBCA, Inc., One State Street Plaza, New York, NY 10004, Attention: ABS
Surveillance; or (h) in the case of Duff & Phelps, to Duff & Phelps Credit
Rating Co., 17 State Street, 12th Floor, New York, NY 10004, Attention:
Asset-Backed Monitoring Group; or as to each of the foregoing, at such other
address as shall be designated by written notice to the other parties.
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SECTION 8.04. ASSIGNMENT. Notwithstanding anything to the contrary
contained herein, except as provided in Section 6.03 and as provided in the
provisions of this Agreement concerning the resignation of the Servicer, this
Agreement may not be assigned by the Servicer.
SECTION 8.05. LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of the Servicer and the Grantee and, to
the extent provided herein or in the Basic Documents, the Note Issuer, the
Indenture Trustee and the Holders, and nothing in this Agreement, whether
express or implied, shall be construed to give to any other Person any legal
or equitable right, remedy or claim in the Intangible Transition Property or
under or in respect of this Agreement or any covenants, conditions or
provisions contained herein.
SECTION 8.06. SEVERABILITY. Any provision of this Agreement that is
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.
SECTION 8.07. SEPARATE COUNTERPARTS. This Agreement may be executed
by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 8.08. HEADINGS. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
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SECTION 8.09. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of Illinois, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 8.10. ASSIGNMENTS TO NOTE ISSUER AND INDENTURE TRUSTEE. The
Servicer acknowledges and consents to the assignment of any or all of the
Grantee's rights and obligations hereunder to the Note Issuer pursuant to the
Sale Agreement, and the collateral assignment of any or all of the Note
Issuer's rights and obligations hereunder to the Indenture Trustee pursuant
to the Indenture. The Servicer agrees that the Note Issuer and the Indenture
Trustee, as assignees, shall, subject to the terms of the Basic Documents,
have the right to enforce this Agreement on behalf of the Holders and to
exercise directly all of the Grantee's rights and remedies under this
Agreement (including without limitation, the right to give or withhold any
consents or approvals of the Grantee to be given or withheld hereunder).
After the Grantee transfers its rights and obligations hereunder to the Note
Issuer pursuant to the Sale Agreement, any duty the Servicer owes to the
Grantee and the Note Issuer hereunder shall be fully performed if such duty
is performed for the benefit of the Note Issuer alone. The Note Issuer and
the Indenture Trustee on behalf of the Holders shall all be expressly deemed
third-party beneficiaries of this Agreement.
SECTION 8.11. NONPETITION COVENANTS. Notwithstanding any prior
termination of this Agreement or the Indenture, but subject to the ICC's
right to order the sequestration and payment of revenues arising with respect
to the Intangible Transition Property notwithstanding any bankruptcy,
reorganization or other insolvency proceedings with respect to the debtor,
pledgor or transferor of the Intangible Transition Property pursuant to any
applicable Funding Order or other applicable law, the Servicer shall not,
prior to the date which is one year and one day after the
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termination of the Indenture, acquiesce, petition or otherwise invoke or
cause the Grantee, the Note Issuer or the Delaware Trustee to invoke or join
with them in provoking the process of any court or governmental authority for
the purpose of commencing or sustaining a case against the Grantee, the Note
Issuer or the Delaware Trustee under any Federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Grantee,
the Note Issuer or the Delaware Trustee or any substantial part of the
property of the Grantee, the Note Issuer or the Delaware Trustee, or ordering
the winding up or liquidation of the affairs of the Grantee, the Note Issuer
or the Delaware Trustee.
SECTION 8.12. LIMITATION OF LIABILITY. It is expressly understood and
agreed by the parties hereto that (a) this Agreement is acknowledged and
accepted by First Union Trust Company, National Association ("First Union"),
not individually or personally but solely as Delaware Trustee on behalf of
the Note Issuer, and by Harris Trust and Savings Bank ("Harris"), not
individually or personally but solely as Indenture Trustee on behalf of the
Holders, in each case in the exercise of the powers and authority conferred
and vested in it, (b) the representations, undertakings and agreements herein
made by the Delaware Trustee on behalf of the Note Issuer, and by the
Indenture Trustee on behalf of the Holders, are made and intended not as
personal representations, undertakings and agreements by First Union and
Harris, respectively, but are made and intended for the purpose of binding
only the Note Issuer and the Holders, respectively, (c) nothing herein
contained shall be construed as creating any liability on First Union or
Harris, individually or personally, to perform any covenant either expressed
or implied contained herein, except in their respective capacities as
Delaware Trustee and Indenture Trustee, all such liability, if any, being
expressly waived by the parties who are signatories to this Agreement and by
any Person claiming by, through or under such parties and (d) under no
circumstances shall First Union or Harris, be
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personally liable for the payment of any indebtedness or expenses of the Note
Issuer or the Holders, respectively, or be personally liable for the breach
or failure of any obligation, representation, warranty or covenant made or
undertaken by the Delaware Trustee or the Indenture Trustee, respectively,
under this Agreement; PROVIDED, HOWEVER, that this provision shall not
protect First Union or Harris against any liability that would otherwise be
imposed by reason of willful misconduct, bad faith or gross negligence in the
performance of their respective duties under this Agreement.
SECTION 8.13. FINAL TERMINATION. Except for those obligations which are
expressly provided herein to survive the termination of this Agreement, and
unless this Agreement is previously terminated in accordance with Section 7.01,
the obligations of the Servicer and of the Grantee shall terminate upon the
payment to the Indenture Trustee, and corresponding distribution to the Holders,
of all amounts required to be paid or distributed to them pursuant to this
Agreement, the Notes and the Indenture.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
ILLINOIS POWER SECURITIZATION
LIMITED LIABILITY COMPANY
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
ILLINOIS POWER COMPANY
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Acknowledged and Accepted:
FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION, not in
its individual capacity but
solely as Delaware Trustee
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
HARRIS TRUST AND SAVINGS BANK,
not in its individual capacity
but solely as
Indenture Trustee
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
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ANNEX I
TO
SERVICING AGREEMENT
The Servicer agrees to comply with the following servicing procedures:
SECTION 1. DEFINITIONS.
(a) Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Servicing Agreement.
(b) Whenever used in this Annex I, the following words and phrases shall
have the following meanings:
"APPLICABLE MDMA" means with respect to each Customer, the meter data
management agent providing meter reading services for that Customer's account.
"BILLED IFCS" means the amounts of IFCs billed to Customers, whether
billed directly to such Customers by the Servicer or indirectly through an
Applicable ARES pursuant to Consolidated ARES Billing.
"CONSOLIDATED ARES BILLING" means the billing option available to
Customers served by an ARES pursuant to which such ARES will be responsible for
billing and collecting all charges to Customers electing such billing option,
including the IFCs, all in accordance with applicable ICC Regulations.
"IFC CUSTOMER CLASS" means the separate classes of Customers for IFC
billing purposes set forth in any Tariffs.
"LEVELIZED PAYMENT PLAN" means a billing plan offered by the Servicer
which, if elected by a Customer, provides for monthly charges to such Customer
on its Bills which are calculated as 1/12th of the amount billed (or which would
have been billed to the Customer based on actual usage) during the preceding
twelve months, with the Customer being charged or credited (as the case may be),
at the time billing to the Customer under the Levelized Payment Plan terminates,
for the difference between the amounts billed to the Customer pursuant to the
Levelized Payment Plan and the amount that would have been billed to the
Customer based on actual usage.
"SERVICER POLICIES AND PRACTICES" means, with respect to the
Servicer's duties under this Annex I, the policies and practices of the Servicer
applicable to such duties that the Servicer follows with respect to comparable
assets that it services for itself.
SECTION 2. DATA ACQUISITION.
(a) INSTALLATION AND MAINTENANCE OF METERS. Except to the extent that an
ARES is responsible for such services pursuant to an ARES Service Agreement, the
Servicer shall cause to
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be installed, replaced and maintained meters in such places and in such
condition as will enable the Servicer to obtain usage measurements for each
Customer at least once every Billing Period.
(b) METER READING. At least once each Billing Period, the Servicer shall
obtain usage measurements from the Applicable MDMA for each Customer; PROVIDED,
HOWEVER, that the Servicer may determine any Customer's usage on the basis of
estimates in accordance with applicable ICC Regulations.
(c) COST OF METERING. Neither the Grantee nor the Note Issuer shall be
obligated to pay any costs associated with the metering duties set forth in this
Section 2, including, but not limited to, the costs of installing, replacing and
maintaining meters, nor shall the Grantee or the Note Issuer be entitled to any
credit against the Servicing Fee for any cost savings realized by the Servicer
or any ARES as a result of new metering and/or billing technologies.
SECTION 3. USAGE AND BILL CALCULATION.
The Servicer shall obtain a calculation of each Customer's usage (which may
be based on data obtained from such Customer's meter read or on usage estimates
determined in accordance with applicable ICC Regulations) at least once each
Billing Period and shall determine therefrom each Customer's individual IFCs to
be included on such Customer's Bill; PROVIDED, HOWEVER, that in the case of
Customers served by an ARES under the Consolidated ARES Billing option, the
Applicable ARES, rather than the Servicer, may determine such Customer's
individual IFCs to be included on such Customer's Bills based on billing factors
provided by the Servicer, and, in such case, the Servicer shall deliver to the
Applicable ARES such billing factors as are necessary for the Applicable ARES to
calculate such Customers' respective IFCs as such charges may change from time
to time pursuant to Adjustments.
SECTION 4. BILLING.
The Servicer shall implement the IFCs as of the Closing Date and shall
thereafter bill each Customer or the Applicable ARES for the respective
Customer's outstanding current and past due IFCs accruing through December 31,
2008, or such longer period during which the Notes may remain outstanding, all
in accordance with the following:
(a) FREQUENCY OF BILLS; BILLING PRACTICES. In accordance with the
Servicer's then-existing Servicer Policies and Practices for its own charges, as
such Servicer Policies and Practices may be modified from time to time, the
Servicer shall generate and issue a Bill to each Customer, or, in the case of a
Customer who has elected Consolidated ARES Billing, to the Applicable ARES, for
such Customer's respective IFCs once every applicable Billing Period, at the
same time, with the same frequency and on the same Bill as that containing the
Servicer's own charges to such Customer or ARES, as the case may be. In the
event that the Servicer makes any material modification to these practices, it
shall notify the Grantee, the Note Issuer, the Indenture Trustee, and the Rating
Agencies prior to the effectiveness of any such modification; PROVIDED, HOWEVER,
that the Servicer may not make any modification that will materially adversely
affect the Holders.
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(b) FORMAT.
(i) Each Bill to a Customer shall contain the charge corresponding
to the respective IFCs owed by such Customer for the applicable Billing Period.
The IFCs and related credits shall each appear as a separate line-item on each
Bill.
(ii) In the case of each Customer that has elected Consolidated ARES
Billing, the Servicer shall deliver to the Applicable ARES itemized charges for
such Customer setting forth such Customer's IFCs and related credits, each as a
separate line-item.
(iii) The Servicer shall conform to such requirements in respect of
the format, structure and text of Bills delivered to Customers and ARES as
applicable ICC Regulations shall from time to time prescribe. To the extent
that Bill format, structure and text are not prescribed by the Public Utilities
Act or by applicable ICC Regulations, the Servicer shall, subject to clauses (i)
and (ii) above, determine the format, structure and text of all Bills in
accordance with its reasonable business judgment, its Servicer Policies and
Practices with respect to its own charges and prevailing industry standards.
(c) ALLOCATIONS OF IFCS. IFCs and related credits shall be deducted from
all amounts constituting Applicable Rates and from all charges to Customers from
which IFCs must be deducted pursuant to the Funding Orders, whether or not such
Applicable Rates or charges are computed on a cents per kilowatt hours basis,
according to some other usage-based calculation, on a fixed basis, or in any
other fashion or by any combination of the foregoing. If the IFC calculated for
any Customer for any Billing Period exceeds the amount of its otherwise
Applicable Rates, then the Bill to such Customer shall reflect an IFC and
related credit each equal to the total amount of such Applicable Rates.
(d) DELIVERY. The Servicer shall deliver all Bills to Customers (i) by
United States Mail in such class or classes as are consistent with the Servicer
Policies and Practices followed by the Servicer with respect to its own charges
to its customers or (ii) by any other means, whether electronic or otherwise,
that the Servicer may from time to time use to present its own charges to its
customers. In the case of Customers that have elected Consolidated ARES
Billing, the Servicer shall deliver all Bills to the Applicable ARES by such
means as are prescribed by applicable ICC Regulations, or if not prescribed by
applicable ICC Regulations, by such means as are mutually agreed upon by the
Servicer and the Applicable ARES and are consistent with ICC Regulations. The
Servicer or an ARES, as applicable, shall pay from its own funds all costs of
issuance and delivery of all Bills, including but not limited to printing and
postage costs as the same may increase or decrease from time to time.
SECTION 5. CUSTOMER SERVICE FUNCTIONS.
The Servicer shall handle all Customer inquiries and other Customer service
matters according to the same procedures it uses to service Customers with
respect to its own charges.
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SECTION 6. COLLECTIONS; PAYMENT PROCESSING; REMITTANCE.
(a) COLLECTION EFFORTS, POLICIES, PROCEDURES.
(i) The Servicer shall use reasonable efforts to collect all Billed
IFCs from Customers and Third-Party Collectors (including ARES) as and when the
same become due and shall follow such collection procedures as it follows with
respect to comparable assets that it services for itself or others, including
with respect to the following:
(A) The Servicer shall prepare and deliver overdue notices to
Customers and ARES in accordance with applicable ICC
Regulations and Servicer Policies and Practices.
(B) The Servicer shall apply late payment charges to outstanding
Customer and ARES balances in accordance with applicable ICC
Regulations. All late payment charges and interest collected
shall be payable to and retained by the Servicer as a component
of its compensation under the Agreement, and the Note Issuer
shall have no right to share in the same.
(C) The Servicer shall deliver verbal and written final notices of
delinquency and possible disconnection in accordance with
applicable ICC Regulations and Servicer Policies and Practices.
(D) The Servicer shall adhere to and carry out disconnection
policies in accordance with the Public Utilities Act and
applicable ICC Regulations and Servicer Policies and Practices.
(E) The Servicer may employ the assistance of collection agents to
collect any past-due IFCs in accordance with the applicable ICC
regulations and Servicer Policies and Practices and the
Tariffs.
(F) The Servicer shall apply Customer and ARES deposits to the
payment of delinquent accounts in accordance with applicable
ICC Regulations and Servicer Policies and Practices and
according to the priorities set forth in Section 6(b)(ii),
(iii) and (iv) of this Annex I.
(ii) The Servicer shall not waive any late payment charge or any
other fee or charge relating to delinquent payments, if any, or waive, vary or
modify any terms of payment of any amounts payable by a Customer, in each case
unless such waiver or action: (A) would be in accordance with the Servicer's
customary practices or those of any successor Servicer with respect to
comparable assets that it services for itself and for others; (B) would not
materially adversely affect the rights of the Holders; and (C) would comply with
applicable law; PROVIDED, HOWEVER, that notwithstanding anything in the
Agreement or this Annex I to the contrary, the Servicer is authorized
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to write off any Billed IFCs, in accordance with its Servicer Policies and
Practices, that have remained outstanding for 180 days or more.
(iii) The Servicer shall accept payment from Customers and
Third-Party Collectors in respect of Billed IFCs in such forms and methods
and at such times and places as it accepts for payment of its own charges.
The Servicer shall accept payment from ARES in respect of Billed IFCs in such
forms and methods and at such times and places as the Servicer and each ARES
shall mutually agree in accordance with applicable ICC Regulations, and the
Servicer shall give prompt written notice to the Rating Agencies of any such
agreements.
(b) PAYMENT PROCESSING; ALLOCATION; PRIORITY OF PAYMENTS.
(i) The Servicer shall post all payments received to Customer
accounts as promptly as practicable, and, in any event, substantially all
payments shall be posted no later than (A) one Servicer Business Day after
receipt by the Servicer if payment is made directly to the Servicer by a
Customer, (B) two Servicer Business Days after receipt by a Thirty-Party
Collector (other than an ARES or another electric utility) acting as agent for
the Servicer, or (C) two Servicer Business Days after receipt by the Servicer
from an ARES or another electric utility.
(ii) Subject to clause (iii) below, the Servicer shall apply
payments received to each Customer's or Applicable ARES' account in proportion
to the charges contained on the outstanding Bill to such Customer or Applicable
ARES.
(iii) Any amount collected by the Servicer that represent partial
payments of the total Bill to a Customer or ARES shall be allocated to amounts
owed to the Note Issuer and Illinois Power, regardless of age, pro rata in
proportion to their respective percentages of the total amount of their combined
outstanding charges on such Bill.
(iv) The Servicer shall hold all over-payments for the benefit of
the Note Issuer and Illinois Power and shall apply such funds to future Bill
charges in accordance with clauses (ii) and (iii) above as such charges become
due.
(v) For Customers on a Levelized Payment Plan, the Servicer shall
treat IFC Payments received from such Customers as if such Customers had been
billed for their respective IFCs in the absence of the Levelized Payment Plan;
partial payment of a Levelized Payment Plan payment shall be allocated according
to clause (iii) above and overpayment of a Levelized Payment Plan payment shall
be allocated according to clause (iv) above.
(c) ACCOUNTS; RECORDS.
The Servicer shall maintain accounts and records as to the Intangible
Transition Property accurately and in accordance with its standard accounting
procedures and in sufficient detail (i) to permit reconciliation between
payments or recoveries with respect to the Intangible Transition Property and
the amounts from time to time remitted to the Collection Account in respect
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of the Intangible Transition Property and (ii) to permit the IFC Collections
held by the Servicer to be accounted for separately from the funds with which
they may be commingled, so that the dollar amounts of IFC Collections commingled
with the Servicer's funds may be properly identified and traced.
(d) INVESTMENT OF IFC PAYMENTS RECEIVED.
Prior to remittance on the applicable Monthly Remittance Date (or, to
the extent remittances are required more frequently under the Indenture, prior
to each Daily Remittance) the Servicer may invest IFC Payments received at its
own risk and for its own benefit, and such investments and, so long as the
Servicer complies with its obligations under the immediately preceding section
(c), such funds shall not be required to be segregated from the other investment
and funds of the Servicer.
(e) CALCULATION OF COLLECTIONS
(i) For purposes of Section 6.11 of the Agreement and Section 6(g)
of this Annex, the IFC Payments collected by the Servicer on any Servicer
Business Day shall be the sum of (A) the IFC Payments posted to Customer
accounts of the Servicer on the second preceding Servicer Business Day in
accordance with Section 6(b) of this Annex and (B) any Allocable IFC Revenue
Amounts, determined in accordance with Section 6(f) of this Annex, received by
the Servicer on such second preceding Servicer Business Day.
(ii) All calculations of collections shall be made in good faith.
(f) ALLOCABLE IFC REVENUE AMOUNTS
(i) The Servicer shall monitor Illinois Power's receipt of any
fixed payments of transition charges under Section 16-108(h) of the Public
Utilities Act, and shall, concurrently with such receipt, set aside and allocate
for the benefit of the Grantee and the Note Issuer, as proceeds of the
Intangible Transition Property, an amount with respect to each Customer equal to
the product of (a) the IFC which is then in effect for such Customer at the time
of receipt TIMES (b) the total number of kilowatt-hours utilized to compute the
amount of such fixed transition charges.
(ii) The Servicer shall monitor Illinois Power's receipt of any
revenues derived from condemnation proceedings or FERC stranded cost recoveries
or any other amounts which reflect compensation for lost revenues which would
otherwise have been attributable to Applicable Rates (collectively, "LOST
REVENUE RECOVERIES"), and shall, concurrently with the receipt thereof, set
aside and allocate for the benefit of the Grantee and the Note Issuer, as
proceeds of the Intangible Transition Property, an amount equal to (a) the total
dollar amount of such Lost Revenue Recoveries TIMES (b) a fraction, (1) the
numerator of which equals the weighted average of the IFCs applicable to all
classes of Customers the revenues from which are included in the calculation of
such Lost Revenue Recoveries and (2) the denominator of which equals the
weighted average of the Applicable Rates charged to such Customers, with such
weighted averages to be in each case calculated based
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on the respective IFCs and Applicable Rates applicable to such classes for the
most recent calendar year then ended.
(iii) All amounts set aside pursuant this Section 6(f) shall
constitute Allocable IFC Revenue Amounts, shall comprise part of the Intangible
Transition Property, and shall be remitted to the Indenture Trustee in
accordance with the other provisions of this Servicing Agreement and the
Indenture.
(g) REMITTANCES.
(i) The Note Issuer shall cause to be established the Collection
Account in the name of the Indenture Trustee in accordance with the Indenture.
(ii) The Servicer shall make remittances to the Collection Account
in accordance with Section 6.11 of the Agreement.
(iii) In the event of any change of account or change of institution
affecting the Collection Account, the Note Issuer shall provide written notice
thereof to the Servicer by the earlier of: (A) five Business Days from the
effective date of such change, or (B) five Business Days prior to the next
Monthly Remittance Date, if any.
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Exhibit 10.5
Form of Remediation Agreement
REMEDIATION AGREEMENT
REMEDIATION AGREEMENT, dated as of December ___, 1998 (as amended,
restated, supplemented or otherwise modified from time to time, this
"AGREEMENT") is made by ILLINOIS POWER COMPANY, an Illinois corporation
("ILLINOIS POWER") in favor of the "Holders" (as defined below) and HARRIS
TRUST AND SAVINGS BANK, an Illinois banking corporation not in its individual
capacity but solely in its capacity as Indenture Trustee (the "INDENTURE
TRUSTEE") under the Indenture (as defined below).
WITNESSETH
WHEREAS, pursuant to that certain Indenture dated as of the date
hereof, between Illinois Power Special Purpose Trust (the "NOTE ISSUER") and
the Indenture Trustee (as the same may be amended, restated, supplemented or
otherwise modified from time to time, the "INDENTURE"), the Note Issuer will
be issuing certain Notes, to be supported by certain assets vested in
Illinois Power Securitization Limited Liability Company (the "GRANTEE") and
assigned by the Grantee to the Note Issuer, all as more particularly
described in that certain Agreement Relating to Grant of Intangible
Transition Property (as the same may be amended, restated, supplemented or
otherwise modified from time to time, the "GRANT AGREEMENT") by and between
Illinois Power and the Grantee dated as of December ___ 1998 and that certain
Intangible Transition Property Sale Agreement (as the same may be amended,
restated, supplemented or otherwise modified from time to time, the "SALE
AGREEMENT") by and between the Grantee and the Note Issuer, dated as of
December ___ 1998; and
WHEREAS, the proceeds of the Notes are being paid to Illinois Power
in connection with certain transactions contemplated by Article XVIII of the
Public Utilities Act and the issuance of the Notes is therefore of direct and
tangible benefit to Illinois Power;
NOW, THEREFORE, in order to induce the Holders to purchase the
Notes, and to provide further assurance to such Holders that all proceeds of
the assets which are intended to be vested in the Grantee and assigned to the
Note Issuer to support the payment of the Notes will in fact be paid to the
Indenture Trustee to pay the Notes, Illinois Power hereby agrees, for the
direct benefit of the Holders, and not by way of assignment of any rights
under the Grant Agreement, as follows:
SECTION 1. DEFINED TERMS. (a) Capitalized terms used herein and not
otherwise defined herein have the meanings assigned to them in the Indenture.
<PAGE>
(b) Non-capitalized terms used herein which are defined in the
Public Utilities Act shall, as the context requires, have the meanings
assigned to such terms in the Public Utilities Act, but without giving effect
to amendments to the Public Utilities Act after the date hereof which have a
material adverse effect on the Indenture Trustee or the Holders.
(c) All terms defined in this Agreement shall have the defined
meaning when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(d) The words "hereof," "herein," "hereunder" and words of similar
import, when used in this Agreement, shall refer to this Agreement as a whole
and not to any particular provision of this Agreement; and the term
"including" shall mean "including without limitation".
(e) The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter forms of such terms.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF ILLINOIS POWER
(a) Illinois Power is duly organized and validly existing as a
corporation in good standing under the laws of the State of Illinois, with
the power and authority to own its properties and to conduct its business as
such properties are currently owned and such business is presently conducted
and to enter into this Agreement.
(b) Illinois Power has the requisite power and authority to
execute and deliver this Agreement and to carry out its terms and the
execution, delivery and performance of this Agreement have been duly
authorized by Illinois Power by all necessary corporate action.
(c) This Agreement constitutes a legal, valid and binding
obligation of Illinois Power enforceable against Illinois Power in accordance
with its terms, subject to applicable insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws relating to or affecting
creditors' rights generally from time to time in effect and to general
principles of equity (including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing), regardless of whether
considered in a proceeding in equity or at law.
(d) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not (i) conflict with,
result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time) a default under, the Articles of
Incorporation or by-laws of Illinois Power,
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or any indenture, agreement or other instrument to which Illinois Power is a
party or by which it is bound; (ii) result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement or other instrument; or (iii) violate any law or any
order, rule or regulation applicable to Illinois Power of any court or of any
Federal or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over Illinois Power or its properties.
(e) Upon the effectiveness of the 1998 Initial Tariff (i) all of
the 1998 Transition Property constitutes a current property right vested in
the Grantee; (ii) the 1998 Transition Property includes, without limitation,
(A) the right, title and interest in the IFCs authorized under the 1998
Funding Order, as adjusted from time to time, (B) the right, title and
interest in all revenues, collections, claims, payments, money or proceeds of
or arising from the IFCs set forth in the 1998 Initial Tariff, and (C) all
rights to obtain adjustments to the IFCs pursuant to the 1998 Funding Order;
and (iii) the Note Issuer is entitled to impose and collect the IFCs
described in the 1998 Funding Order and the 1998 Initial Tariff in an
aggregate amount equal to the principal amount of the Notes, all interest
thereon, all amounts required to be deposited in the Reserve Subaccount, the
Overcollateralization Subaccount and (to the extent payable from the proceeds
of the IFCs) the Capital Subaccount, and all related fees, costs and expenses
in respect of the Notes until they have been paid in full, subject only to
the $1.634 billion limitation set forth in the 1998 Funding Order as to the
maximum dollar amount of 1998 Transition Property created thereunder.
(f) To the fullest extent permitted by the Funding Law and all
other applicable law, the 1998 Transition Property and the right to impose
and collect IFCs contemplated thereunder constitute current property rights
of the Grantee and its assigns, including the Note Issuer and its assigns
(including the Indenture Trustee on behalf of the Holders), which property
has been placed beyond the reach of Illinois Power and its creditors, as in a
true sale, and which property rights may not be limited, altered, impaired,
reduced or otherwise terminated by any subsequent actions of Illinois Power
or any third party and which shall, to the full extent permitted by law, be
enforceable against Illinois Power, its successors and assigns, and all other
third parties (including judicial lien creditors) claiming an interest
therein by or through Illinois Power or its successors and assigns.
SECTION 3: COVENANTS OF ILLINOIS POWER. So long as any of the Notes
are outstanding, Illinois Power will take any and all actions reasonably
necessary to preserve the rights of Holders with respect to payments on the
Notes out of the amounts represented by IFCs or their equivalent, including,
but not limited to, (i) making appropriate filings with the State of
Illinois, the ICC or other regulatory bodies to defend, preserve and create
on behalf of Holders the right to receive payments as provided in the Notes,
(ii) defending against or instituting and pursuing legal actions and
appearing or testifying at hearings or similar proceedings, as may be
necessary to block or
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overturn any attempts to cause a repeal of; modification of or supplement to
or judicial invalidation of the Amendatory Act or any Funding Order or the
rights of the Holders by legislative enactment or otherwise that would be
adverse to the Grantee, the Note Issuer or any Holders, (iii) continuing to
deduct and pay over to the Indenture Trustee for the benefit of the Holders,
all IFCs and IFC Payments or equivalent revenues received by Illinois Power
notwithstanding any declaration of invalidity of the Amendatory Act, the
Funding Law, the Funding Order and/or the Grant Agreement, and (iv) making
any and all payments required to be made by Illinois Power under the Basic
Documents for the benefit of the Holders and the Indenture Trustee
notwithstanding any declaration of invalidity described above.
SECTION 4: NATURE OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties set forth in SECTION 2 of this Agreement,
insofar as they involve conclusions of law, are made not on the basis that
Illinois Power purports to be a legal expert or to be rendering legal advice,
but rather to reflect the parties' good faith understanding of the legal
basis on which the parties are entering into this Agreement and the other
Basic Documents and the basis on which the Holders are purchasing the Notes,
and to reflect the parties' agreement that, if such understanding turns out
to be incorrect or inaccurate, Illinois Power will be obligated to indemnify
the Holders on account of any such inaccuracy.
SECTION 5: MERGER OR CONSOLIDATION OF OR ASSUMPTION OF THE
OBLIGATIONS OF ILLINOIS POWER. Any Person (a) into which Illinois Power may
be merged or consolidated, (b) which may result from any merger or
consolidation to which Illinois Power shall be a party or (c) which may
succeed to the properties and assets of Illinois Power substantially as a
whole, which Person in any of the foregoing cases executes an agreement of
assumption to perform every obligation of Illinois Power hereunder, shall be
the successor to Illinois Power under this Agreement without further act on
the part of any of the parties to this Agreement.
SECTION 6. AMENDMENTS. This Agreement may, with the prior written
consent of the Rating Agencies and written notice to the Indenture Trustee,
be amended in writing from time to time by Illinois Power PROVIDED that,
unless the Rating Agency Condition has been satisfied with respect to such
amendment, this Agreement may not be so amended except with the prior written
consent of the Indenture Trustee and Holders holding not less than a majority
of the Outstanding Amount of the Notes of all Series. Promptly after the
execution of any such amendment or consent, Illinois Power shall furnish a
copy of such amendment or consent to the Grantee, the Note Issuer and each of
the Rating Agencies. It shall not be necessary for the consent of the Rating
Agencies or the Holders pursuant to this Section to approve the particular
form of any proposed amendment or consent, but it shall be sufficient if such
consent shall approve the substance thereof.
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SECTION 7: NOTICES. All demands, notices and communications upon or
to Illinois Power or the Indenture Trustee shall be in writing, personally
delivered, mailed or sent by facsimile or other similar form of rapid
transmission, and shall be deemed to have been duly given upon receipt (a) in
the case of Illinois Power, to Illinois Power Company, 500 South 27th Street,
Decatur, Illinois 62521 and (b) in the case of the Indenture Trustee, at the
Corporate Trust Office, or as to each of the foregoing, at such other address
as shall be designated by written notice to the other party.
SECTION 8. ASSIGNMENT. Notwithstanding anything to the contrary
contained herein, except as provided in Section 6, this Agreement may not be
assigned by Illinois Power.
SECTION 9. LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of the Indemnified Parties and nothing
in this Agreement, whether express or implied, shall be construed to give to
any other Person (including, without lmitation, the Grantee or the Note
Issuer) any legal or equitable right, remedy or claim under or in respect of
this Agreement or any covenants, conditions or provisions contained herein.
SECTION 10. SEVERABILITY. Any provision of this Agreement that is
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.
SECTION 11. SEPARATE COUNTERPARTS. This Agreement may be executed
by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument
SECTION 12. HEADINGS. The headings of the various Sections herein
are for convenience of reference only and shall not define or limit any of
the terms or provisions hereof
SECTION 13. INTEGRATION. This Agreement represents the agreement of
Illinois Power with respect to the subject matter hereof; and there are no
promises, undertakings, representations or warranties by Illinois Power
relative to the subject matter hereof not expressly set forth or referred to
herein.
SECTION 14. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of Illinois, without reference to its
conflict of law
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provisions, and the obligations, rights and remedies of the parties hereunder
shall be determined in accordance with such laws.
SECTION 15. HOLDERS AS THIRD PARTY BENEFICIARIES. Illinois Power
and the Indenture Trustee agree that (i) the Holders are direct and express
third-party beneficiaries of the provisions of this Agreement and (ii) the
Indenture Trustee is authorized to enforce the terms and provisions of this
Agreement on behalf of, and for the benefit of, the Holders.
SECTION 16. REPRESENTATIONS. WARRANTIES AND INDEMNITIES TO SURVIVE.
The agreements, representations, warranties, indemnities and other statements
of Illinois Power or its officers set forth in or made pursuant to this
Agreement will remain in full force and effect and will survive (a) the grant
of the 1998 Transition Property and the issuance and delivery of the Notes
and (b) the termination, cancellation or invalidity of the Amendatory Act,
the Funding Law, any Funding Order or the Grant Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective officers as of the day and year first
above written.
ILLINOIS POWER COMPANY
By: ___________________________________
Name:
Title:
HARRIS TRUST AND SAVINGS BANK,
not in its individual capacity, but solely in its
capacity as INDENTURE TRUSTEE
under the Indenture
By: ___________________________________
Name:
Title:
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