EXHIBIT 10.2
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AGREEMENT RELATING TO GRANT OF
INTANGIBLE TRANSITION PROPERTY
between
COMMONWEALTH EDISON COMPANY
and
COMED FUNDING, LLC
Dated as of December 16, 1998
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TABLE OF CONTENTS
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 COMED . . . . . . . . . . . . . . . . . 4
SECTION 3.01. ORGANIZATION AND GOOD STANDING . . . . . . . . . . . . . . 4
SECTION 3.02. DUE QUALIFICATION. . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.03. POWER AND AUTHORITY. . . . . . . . . . . . . . . . . . . . 5
SECTION 3.04. BINDING OBLIGATION . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.05. NO VIOLATION . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.06. NO PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3.07. APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3.08. THE 1998 TRANSITION PROPERTY . . . . . . . . . . . . . . . 7
ARTICLE IV
COVENANTS OF COMED. . . . . . . . . . . . . . . . . . . . . . . . . . . .12
SECTION 4.01. CORPORATE EXISTENCE. . . . . . . . . . . . . . . . . . . .12
SECTION 4.02. NO LIENS . . . . . . . . . . . . . . . . . . . . . . . . .12
SECTION 4.03. DELIVERY OF COLLECTIONS. . . . . . . . . . . . . . . . . .13
SECTION 4.04. NOTICE OF LIENS. . . . . . . . . . . . . . . . . . . . . .13
SECTION 4.05. COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . .13
SECTION 4.06. COVENANTS RELATED TO THE 1998 TRANSITION PROPERTY
AND THE NOTES . . . . . . . . . . . . . . . . . . . .13
SECTION 4.07. PROTECTION OF TITLE. . . . . . . . . . . . . . . . . . . .15
SECTION 4.08. NONPETITION COVENANTS. . . . . . . . . . . . . . . . . . .16
SECTION 4.09. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . .16
SECTION 4.10. CONTRACTS FOR NON-TARIFFED SERVICES. . . . . . . . . . . .17
SECTION 4.11. PRESERVATION OF RIGHT OF NOTEHOLDERS TO RECEIVE PAYMENT. .17
ARTICLE V
COMED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
SECTION 5.01. LIABILITY OF COMED; INDEMNITIES. . . . . . . . . . . . . .18
SECTION 5.02. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, COMED . . . . . . . . . . . . . . . .19
SECTION 5.03. LIMITATION ON LIABILITY OF COMED AND OTHERS. . . . . . . .20
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ARTICLE VI
MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . .21
SECTION 6.01. AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . .21
SECTION 6.02. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . .22
SECTION 6.03. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . .23
SECTION 6.04. LIMITATIONS ON RIGHTS OF OTHERS. . . . . . . . . . . . . .23
SECTION 6.05. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . .23
SECTION 6.06. SEPARATE COUNTERPARTS. . . . . . . . . . . . . . . . . . .23
SECTION 6.07. HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . .23
SECTION 6.08. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . .23
SECTION 6.09. ASSIGNMENTS TO NOTE ISSUER AND INDENTURE TRUSTEE . . . . .24
SECTION 6.10. HOLDERS AS THIRD PARTY BENEFICIARIES . . . . . . . . . . .24
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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 16, 1998, between COMMONWEALTH EDISON
COMPANY, an Illinois corporation ("ComEd"), and COMED FUNDING, LLC, a Delaware
limited liability company (the "Grantee").
WHEREAS, ComEd filed the Application with the ICC pursuant to Section
18-103 of the Funding Law requesting the issuance of a transitional funding
order;
WHEREAS, ComEd 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 $6,323,000,000; 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 July 21, 1998, which
created and established the intangible transition property requested by ComEd 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 ComEd, 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 to (i) transfer the 1998 Transition
Property to the Note Issuer pursuant to the Sale Agreement, and (ii) pay ComEd
the net proceeds received by the Grantee from the Note Issuer in connection with
such transfer;
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
ComEd Transitional Funding Trust, as the Note Issuer, and Xxxxxx 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 Sections, Schedules and
Exhibits in or to this Agreement unless otherwise specified; and the term
"including" shall mean "including without limitation".
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(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 ComEd's
actions in requesting that the 1998 Transition Property be created and vested in
the Grantee, the Grantee agrees to remit to ComEd 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 ComEd has any interest in the 1998 Transition
Property or any part thereof, ComEd 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 ComEd's right, title and interest, if any, in, to and under the 1998
Transition Property (such grant of the 1998 Transition Property, and such sale,
transfer, assignment, set over and conveyance, to 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 contractual rights to collect IFCs from Customers and Allocable
IFC Revenue Amounts). Such sale, transfer, assignment, set over and conveyance
by ComEd is expressly stated to be an 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
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Application and the 1998 Funding Order, ComEd 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
ComEd shall be deemed to have granted a security interest to the Grantee in the
1998 Transition Property. ComEd 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 COMED
ComEd 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 ComEd has any
interest in the 1998 Transition Property or any part thereof, the sale,
transfer, assignment, set over and conveyance by ComEd contemplated hereby,
(iii) the sale, transfer, assignment, set over and conveyance of the 1998
Transition Property and Related Assets to the Note Issuer, (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. ComEd 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
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requisite power, authority and legal right to request that the ICC issue the
1998 Funding Order. ComEd 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. ComEd 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 ComEd's business, operations, assets,
revenues or properties).
SECTION 3.03. POWER AND AUTHORITY. ComEd 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 ComEd by all necessary corporate action.
SECTION 3.04. BINDING OBLIGATION. This Agreement constitutes a legal,
valid and binding obligation of ComEd enforceable against ComEd 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
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default under, the Articles of Incorporation or by-laws of ComEd, or any
indenture, agreement or other instrument to which ComEd 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 ComEd of any court or of any Federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over ComEd or its properties.
SECTION 3.06. NO PROCEEDINGS. There are no proceedings or investigations
pending or, to ComEd's knowledge, threatened, before any court, Federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over ComEd or its properties involving or relating to ComEd
or the Grantee or to ComEd'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 reasonably be expected to materially and
adversely affect ComEd'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 ComEd's execution and delivery of this Agreement, ComEd's
performance of the transactions contemplated hereby or ComEd's fulfillment of
the terms hereof, except those that have been obtained or made (it being
understood that ComEd nonetheless has ongoing legal obligations to make future
filings with the ICC relating
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to ComEd'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 ComEd 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 ComEd and its successors and
that no interest in or title to the 1998 Transition Property shall be part of
ComEd's estate in the event of the filing of a bankruptcy petition by or against
ComEd under any bankruptcy law. Accordingly, ComEd reaffirms that it has no
right, title or interest in and to the 1998 Transition Property and any sale,
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 ComEd 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 ComEd and its successors,
and no interest in or title to the 1998 Transition Property shall be part of
ComEd's estate in the event of the filing of a bankruptcy petition by or against
ComEd under any bankruptcy law. No portion of the 1998 Transition Property has
been sold, transferred, assigned, pledged or otherwise conveyed by ComEd to any
Person other than the Grantee. Immediately prior to the transactions
contemplated hereunder, ComEd'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.
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(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, 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 ComEd (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, 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
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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 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) ComEd was
authorized to file the Application, (ii) ComEd filed the Application with the
ICC on April 22, 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 $6.323 billion, and the 1998 Transition Property and
the right to impose and collect IFCs constitute current and original property
rights vested in the Grantee; (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
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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 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 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
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
$6.323 billion
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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 placed beyond the reach of ComEd 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 ComEd or any third party and
which shall, to the full extent permitted by law, be enforceable against ComEd,
its successors and assigns, and all other third parties (including judicial lien
creditors) claiming an interest therein by or through ComEd 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 ComEd 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, ComEd 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 ComEd had
breached any other representations or warranties hereunder.
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ARTICLE IV
COVENANTS OF COMED
SECTION 4.01. CORPORATE EXISTENCE. So long as any of the Notes are
outstanding, ComEd (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 ComEd hereunder is or becomes, organized under
the laws of any other State or of the United States of America, in which case
ComEd 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
ComEd 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 ComEd 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, ComEd (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 ComEd.
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SECTION 4.03. DELIVERY OF COLLECTIONS. If ComEd receives collections in
respect of the IFCs or the proceeds thereof, or in replacement therefor,
including, without limitation, any Allocable IFC Revenue Amounts, ComEd agrees
to hold such payments in trust for the Servicer and to pay the Servicer all
payments received by ComEd in respect thereof as soon as practicable after
receipt thereof by ComEd, but in no event later than two Business Days after
such receipt.
SECTION 4.04. NOTICE OF LIENS. ComEd 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. ComEd 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 ComEd's performance of its obligations
hereunder or under any of the other Basic Documents to which it is party.
Without limiting the foregoing, ComEd 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, ComEd 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, ComEd shall not own or
purchase any Notes.
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(c) ComEd 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) 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 ComEd, 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 ComEd 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 ComEd.
(d) So long as any of the Notes are outstanding, (i) except with respect to
federal and other applicable taxes, ComEd 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) ComEd 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, ComEd 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 which are likely to adversely affect ComEd's ability to make timely
recovery of amounts billed to Customers.
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(f) If ComEd determines that 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, ComEd 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. ComEd 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. ComEd 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. ComEd 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 ComEd 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 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 ComEd. ComEd designates the Grantee as its
agent and attorney-in-fact to execute any filings with the ICC or other
instruments required by
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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 ComEd, the Grantee or any other grantee
or assignee of the 1998 Transition Property pursuant to Section 18-107(c)(4) of
the Funding Law, ComEd 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, ComEd
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; PROVIDED that no such tax need be paid if ComEd or one of its
subsidiaries is contesting the same in good faith by appropriate proceedings
promptly instituted and diligently conducted and if ComEd or such
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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 ComEd 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, 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
ComEd 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 ComEd under the Servicing Agreement,
ComEd 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
repeal of, modification of or supplement to or declaration of invalidity of the
Amendatory Act and/or the Funding Law occurring after ComEd and its Affiliates
received the proceeds of such Notes, would not be equitable. ComEd agrees, in
consideration of the receipt of such proceeds, 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, (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,
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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 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 ComEd notwithstanding any repeal of,
modification of or supplement to or declaration of invalidity of the Amendatory
Act, the Funding Law and/or the Funding Order.
ARTICLE V
COMED
SECTION 5.01. LIABILITY OF COMED; INDEMNITIES.
(a) ComEd 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 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 properly withhold or remit
taxes imposed with respect to payments on any Notes).
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(b) ComEd 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 ComEd's breach of any of its representations,
warranties or covenants contained in this Agreement.
(c) ComEd 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).
SECTION 5.02. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS
OF, COMED. Any Person (a) into which ComEd may be merged or consolidated, (b)
which may result from any merger or consolidation to which ComEd shall be a
party or (c) which may succeed to the properties and assets of ComEd
substantially as a whole, which Person in any of the foregoing cases executes an
agreement of assumption to perform every obligation of ComEd hereunder, shall be
the successor to ComEd 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 ComEd is the Servicer)
no Servicer Default, and no event which, after notice or lapse of
19
time, or both, would become a Servicer Default shall have occurred and be
continuing, (ii) ComEd shall have delivered to the Grantee, 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) ComEd 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 ComEd, 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) ComEd 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, ComEd 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 ComEd, 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 ComEd substantially as a whole and becomes
the successor to ComEd 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, ComEd
shall automatically and without further notice be released from its obligations
hereunder.
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SECTION 5.03. LIMITATION ON LIABILITY OF COMED AND OTHERS. ComEd and any
director or officer or employee or agent of ComEd 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, ComEd 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 ComEd 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 ComEd 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 ComEd 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
21
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 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
ComEd, 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 ComEd, to
Commonwealth Edison Company, 00 Xxxxx Xxxxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxx,
Xxxxxxxx 00000, (b) in the case of the Grantee, to ComEd Funding, LLC, c/o
Commonwealth Edison Company, 00 Xxxxx Xxxxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxx,
Xxxxxxxx 00000, (c) in the case of the Note Issuer, to Transitional Funding
Trust, c/o First Union Trust Company, National Association, One Xxxxxx Square,
000 Xxxx Xxxxxx 0xx Xxxxx, Xxxxxxxxxx, Xxxxxxxx 00000, Attn: Corporate Trust
Administration, (d) in the case of the Indenture Trustee, at the Corporate Trust
Office, (e) in the case of Moody's, to Xxxxx'x Investors Service, Inc., ABS
Monitoring Department, 00 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, (f) in the
case of Standard & Poor's, to Standard & Poor's Corporation, 00 Xxxxxxxx (00xx
Xxxxx), Xxx Xxxx, Xxx Xxxx 00000, Attention of Asset Backed Surveillance
Department, (g) in the case of Fitch IBCA, to Fitch IBCA, Inc. Xxx Xxxxx Xxxxxx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention of ABS Surveillance, or (h) in the
case of
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Duff & Xxxxxx, to Xxxx & Xxxxxx Credit Rating Co., 00 Xxxxx Xxxxxx, 00xx Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000, 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 ComEd.
SECTION 6.04. LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of ComEd, 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.
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
23
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. ComEd
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. ComEd 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 ComEd herein.
SECTION 6.10. HOLDERS AS THIRD PARTY BENEFICIARIES. ComEd 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. ComEd 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 of the
24
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
ComEd 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.
COMMONWEALTH EDISON
COMPANY
By: /s/ Xxxx Xxx X. Xxxxxx
---------------------------------
Name: Xxxx Xxx X. Xxxxxx
Title: Vice President and Treasurer
COMED FUNDING, LLC, Grantee
By: /s/ Xxxx Xxx X. Xxxxxx
---------------------------------
Name: Xxxx Xxx X. Xxxxxx
Title: Manager and President
SIGNATURE PAGE
TO GRANT AGREEMENT
