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AMENDED AND RESTATED
MASTER SERVICING
AGREEMENT
among
PECO ENERGY TRANSITION TRUST,
the other Issuers from
time to time party hereto
and
PECO ENERGY COMPANY
Servicer
Dated as of [ ], 2000
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TABLE OF CONTENTS
Page
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ARTICLE I
Definitions
SECTION 1.01. Definitions.................................................. 2
SECTION 1.02. Other Definitional Provisions................................ 13
ARTICLE II
Appointment and Authorization of Servicer
SECTION 2.01. Appointment of Servicer; Acceptance of Appointment........... 14
SECTION 2.02. Authorization................................................ 14
SECTION 2.03. Dominion and Control over Serviced
Intangible Transition Property......................... ....15
ARTICLE III
Billing Services
SECTION 3.01. Duties of Servicer........................................... 16
SECTION 3.02. Collection and Allocation of Intangible Transition Charges... 18
SECTION 3.03. Servicing and Maintenance Standards.......................... 20
SECTION 3.04. Servicer's Certificates...................................... 21
SECTION 3.05. Annual Statement as to Compliance; Notice of Default......... 21
SECTION 3.06. Annual Independent Certified Public Accountants' Report...... 22
SECTION 3.07. Intangible Transition Property Documentation................. 24
SECTION 3.08. Computer Records; Audits of Documentation.................... 24
SECTION 3.09. Defending Intangible Transition Property Against Claims...... 26
SECTION 3.10. Opinions of Counsel.......................................... 27
Contents, p. ii
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ARTICLE IV
Services Related to Intangible
Transition Charges Adjustments
SECTION 4.01. Intangible Transition Charges Adjustments.................... 28
ARTICLE V
The Servicer
SECTION 5.01. Representations and Warranties of Servicer................... 28
SECTION 5.02. Indemnities of Servicer; Release of Claims................... 33
SECTION 5.03. Merger or Consolidation of, or Assumption
of the Obligations of, Servicer............................ 35
SECTION 5.04. Assignment of Servicer's Obligations......................... 37
SECTION 5.05. Limitation on Liability of Servicer and Others............... 38
SECTION 5.06. PECO Energy Not To Resign as Servicer........................ 39
SECTION 5.07. Monthly Servicing Fee........................................ 40
SECTION 5.08. Servicer Expenses............................................ 40
SECTION 5.09. Appointments................................................. 41
SECTION 5.10. Remittances.................................................. 41
SECTION 5.11. Servicer Advances............................................ 43
SECTION 5.12. Protection of Title.......................................... 43
ARTICLE VI
Servicer Default
SECTION 6.01. Servicer Default............................................. 44
SECTION 6.02. Notice of Servicer Default................................... 47
SECTION 6.03. Waiver of Past Defaults...................................... 48
SECTION 6.04. Appointment of Successor..................................... 48
SECTION 6.05. Cooperation with Successor................................... 50
ARTICLE VII
Miscellaneous Provisions
SECTION 7.01. Amendment.................................................... 50
SECTION 7.02. Notices...................................................... 51
SECTION 7.03. Assignment................................................... 52
SECTION 7.04. Limitations on Rights of Others.............................. 52
Contents, p. iii
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SECTION 7.05. Severability................................................. 53
SECTION 7.06. Separate Counterparts........................................ 53
SECTION 7.07. Headings..................................................... 53
SECTION 7.08. Governing Law................................................ 53
SECTION 7.09. Assignment to Bond Trustee................................... 53
SECTION 7.10. Nonpetition Covenants........................................ 54
SECTION 7.11. Addition of Issuers.......................................... 55
SECTION 7.12. Termination by Issuers....................................... 55
SECTION 7.13. Limitation of Liability of Trustee........................... 55
EXHIBIT A Servicing Procedures
EXHIBIT B Supplement for Addition of Issuer
ANNEX 1 ITC Adjustment Process and Reports - PECO
Energy Transition Trust
AMENDED AND RESTATED MASTER SERVICING AGREEMENT dated as of [ ],
2000, among PECO ENERGY TRANSITION TRUST, a Delaware business
trust (the "First Issuer"), the other Issuers from time to time
party hereto (together with the First Issuer, the "Issuers"), and
PECO ENERGY COMPANY, a Pennsylvania corporation, as the servicer
of the Intangible Transition Property (together with each
successor to PECO ENERGY COMPANY (in the same capacity) pursuant
to Section 5.03 or 6.02, the "Servicer").
WHEREAS the Servicer is willing to service the Intangible Transition
Property purchased from the Seller by each Issuer; and
WHEREAS each Issuer, in connection with ownership of Serviced Intangible
Transition Property, desires to engage the Servicer to carry out the functions
described herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and intending to be legally bound hereby, the parties hereto
agree as follows:
2
ARTICLE I
Definitions
SECTION 1.01. Definitions. Whenever used in this Agreement, each of the
following words and phrases shall have the following meaning:
"Agreement" means this Amended and Restated Master Servicing Agreement, as
the same may be amended and supplemented from time to time.
"Annual Accountant's Report" has the meaning specified in Section 3.06(a).
"Basic Documents" has the meaning set forth in the Indentures.
"Bond Trustees" means, collectively, The Bank of New York, a New York
banking corporation, as bond trustee under the Indenture to which the First
Issuer is a party, and each other Person serving as a bond trustee or in a
similar capacity under any of the other Indentures, or any successors to any of
the foregoing.
"Business Day" means any day other than a Saturday, Sunday or a day on
which banking institutions in the City of New York, the City of Philadelphia or
the State of Delaware are required by law or executive order to remain closed.
"Class" means, with respect to any Series, any one of the classes of
Transition Bonds of that Series.
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"Collateral" means, with respect to an Issuer, all property of such Issuer
pledged by it to secure Transition Bonds issued by such Issuer as provided in
the Indenture to which it is a party.
"Collection Period" means the period from and including the first day of a
calendar month to and including the last day of the same calendar month.
"Competitive Transition Charges" means the competitive transition charges
that PECO Energy may impose on Customers as set forth in Appendix A to the Joint
Petition for Approval of Full Settlement of PECO Energy Company's Restructuring
Plan and Related Appeals and approved in the Final Order issued on May 14, 1998
by the PUC with respect to PECO Energy's restructuring plan.
"Counterparty" means any counterparty to a Swap Agreement entered into by
any Issuer.
"Customers" means each person that (i) was a customer of PECO Energy
located within PECO Energy's retail electric service territory on January 1,
1997 or that became a customer of electric services within such territory after
January 1, 1997, (ii) is still located within such territory, and (iii) is in a
Rate Class that has been assigned stranded cost responsibility.
"Duff" means Duff & ▇▇▇▇▇▇ Credit Rating Company or its successor.
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"Fitch IBCA" means Fitch IBCA, Inc. or its successor.
"Formation Documents" means, collectively, the Second Amended and Restated
Trust Agreement of the First Issuer dated as of [ ], 2000, among the
Seller and the trustees named therein, and any other trust agreement,
certificate of incorporation, limited liability company agreement, partnership
agreement, or other document pursuant to which any other Issuer is formed or
governed, in each case, as the same may be amended and supplemented from time to
time.
"Holder" or "Transition Bondholder" means the Person in whose name a
Transition Bond of any Series or Class is registered as provided in the
Indenture therefor.
"Indentures" means, collectively, the indenture dated as of March 1, 1999,
between the First Issuer and The Bank of New York, and each indenture entered
into by any other Issuer in connection with the issuance of Transition Bonds, in
each case as the same may be amended and supplemented from time to time,
including by any Series Supplement.
"Initial Qualified Rate Order" means the order of the PUC issued on May 14,
1998, adopted in accordance with the Statute, which, among other things, creates
Intangible Transition Property and authorizes the imposition and
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collection of Intangible Transition Charges by PECO Energy or its assignee.
"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 90 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
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such debts become due, or the taking of action by such Person in furtherance of
any of the foregoing.
"Intangible Transition Charges" means the amounts authorized by the PUC to
be imposed on all Customer bills with respect to the Intangible Transition
Property and collected, through a non-bypassable mechanism, by the Seller or its
successor or by any other entity which provides electric service to Customers,
to recover Qualified Transition Expenses pursuant to the Qualified Rate Orders.
"Intangible Transition Charges Adjustment" means each adjustment to
Intangible Transition Charges related to the Serviced Intangible Transition
Property made in accordance with Section 4.01 and the Issuer Annexes or in
connection with the redemption by any Issuer of Transition Bonds.
"Intangible Transition Property" means the irrevocable right of the Seller
or its successor or assignee to collect Intangible Transition Charges from
Customers to recover the Qualified Transition Expenses described in the
Qualified Rate Orders, including all right, title and interest of the Seller or
its successor or assignee in such order and in all revenues, collections,
claims, payments, money or proceeds of or arising from Intangible Transition
Charges pursuant to such orders, and all proceeds of any of the foregoing.
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"Intangible Transition Property Documentation" has the meaning assigned to
that term in Section 3.07.
"Issuer Annex" means, with respect to the First Issuer, Annex 1 hereto, and
with respect to any other Issuer, an Annex hereto describing the statements and
certificates to be provided by the Servicer and the procedures regarding
Intangible Transition Charges Adjustments to be followed by the Servicer with
respect to such Issuer.
"Issuers" means, collectively, the First Issuer and each other Person from
time to time named as an Issuer in this Agreement, in each case each until a
successor replaces it and, thereafter, such successor.
"ITC Collections" means amounts collected in respect of Intangible
Transition Charges or the Intangible Transition Property.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind.
"Losses" means collectively, any and all liabilities, obligations, losses,
damages, payments, costs or expenses of any kind whatsoever.
"Monthly Allocation Date" means the first day of each calendar month or, if
any such day is not a Business Day, the immediately succeeding Business Day.
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"Monthly Servicing Fee" means, with respect to any Series of Transition
Bonds, the fee payable to the Servicer on each Monthly Allocation Date for
services rendered, determined pursuant to Section 5.07.
"Moody's" means ▇▇▇▇▇'▇ Investors Service Inc., or its successor.
"Mortgage" means the First and Refunding Mortgage, dated May 1, 1923
between the Counties Gas and Electric Company (to which PECO Energy is
successor) and Fidelity Trust Company (to which First Union National Bank is
successor), as trustee, as supplemented and amended by 96 supplemental
indentures.
"Officers' Certificate" means a certificate signed by (a) the chairman of
the board, the president, the vice chairman of the board, the executive vice
president or any vice president and (b) a treasurer, assistant treasurer,
secretary or assistant secretary, in each case of the Servicer.
"Operating Expenses" means, with respect to any Issuer, all fees, costs,
expenses and indemnity payments owed by such Issuer, including all amounts owed
by such Issuer to a Bond Trustee or any other trustee of such Issuer, the
Monthly Servicing Fee payable in respect of Transition Bonds issued by such
Issuer, legal fees and expenses of the Servicer allocated to such Issuer
pursuant
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to Section 3.09 and legal and accounting fees, costs and expenses of such Issuer
and any trustee of such Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who may
be an employee of or counsel to the Seller or the Servicer, which counsel shall
be reasonably acceptable to the Bond Trustees, the Issuers or the Rating
Agencies, as applicable, and shall be in form reasonably satisfactory to the
Bond Trustee, if applicable.
"PECO Energy" means PECO Energy Company, a Pennsylvania corporation.
"Percentage" means, with respect to any Issuer and any Collection Period,
the percentage equivalent of a fraction, the numerator of which is the aggregate
Intangible Transition Charges (as adjusted from time to time) scheduled to be
collected in such Collection Period applicable to all Series of Transition Bonds
issued by such Issuer and the denominator of which is the aggregate Intangible
Transition Charges (as adjusted from time to time) scheduled to be collected in
such Collection Period applicable to all Series of Transition Bonds issued by
all the Issuers.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), business trust, unincorporated organization or government or any
agency or political subdivision thereof.
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"PUC" means the Pennsylvania Public Utility Commission or any successor.
"PUC Regulations" means any regulations promulgated or adopted by the PUC.
"Qualified Rate Orders" means, collectively, the Initial Qualified Rate
Order and the Second Qualified Rate Order.
"Qualified Transition Expenses" has the meaning assigned to that term in
the Qualified Rate Orders.
"Rate Class" means each of the rate classes into which Customers are
divided as of the date hereof, as such rate classes may be reconfigured from
time to time.
"Rating Agency" means any rating agency rating the Transition Bonds of any
Class or Series at the time of issuance thereof at the request of the Issuer of
such Class or Series. 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 an Issuer, notice of which
designation shall be given to the Bond Trustee under the Indenture to which such
Issuer is a party, any trustee of such Issuer and the Servicer.
"Rating Agency Condition" means, with respect to any action, the
notification in writing by each Rating Agency to the Seller, the Servicer, the
Bond Trustees and
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the applicable Issuer that such action will not result in a reduction or
withdrawal of the then current rating by such Rating Agency of any outstanding
Series or Class of Transition Bonds issued by such Issuer.
"Released Parties" has the meaning specified in Section 5.02(e).
"Remittance Date" means each date on which ITC Collections allocated to any
Issuer are to be remitted by the Servicer to the Bond Trustee for such Issuer
pursuant to Section 5.10.
"Sale Agreements" means, collectively, the Amended and Restated Intangible
Transition Property Sale Agreement dated [ ], 2000, between the Seller and the
First Issuer, and any other agreements between the Seller and any other Issuer
relating to the sale of Intangible Transition Property to such Issuer.
"Second Qualified Rate Order" means the order of the PUC issued on [ ],
2000, adopted in accordance with the Statute, which, among other things, creates
Intangible Transition Property and authorizes the imposition and collection of
Intangible Transition Charges by PECO Energy or its assignee.
"Seller" means PECO Energy and its successors in interest to the extent
permitted hereunder.
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"Series" means any series of Transition Bonds issued by any of the Issuers.
"Series Supplement" means an indenture supplemental to an Indenture that
authorizes a particular Series of Transition Bonds.
"Serviced Intangible Transition Property" means, collectively, all
Intangible Transition Property sold, conveyed, assigned or otherwise transferred
to any Issuer by the Seller or, with respect to an Issuer, all Intangible
Transition Property sold, conveyed, assigned or otherwise transferred to such
Issuer by the Seller.
"Servicer Default" means an event specified in Section 6.01.
"Servicing Fee Rate" means, with respect to any Series of Transition Bonds,
the per annum rate specified in the Series Supplement pursuant to which such
Transition Bonds are issued.
"Standard & Poor's" means Standard & Poor's Rating Group, or its successor.
"Statute" means the Pennsylvania Electricity Generation Customer Choice and
Competition Act, Chapter 28 of Title 66 of the Pennsylvania Consolidated
Statutes, 66 Pa. C.S., ss.2801, et seq.
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"Swap Agreement" means any interest rate swap agreement or agreement with
respect to any hedge or similar transaction entered into by any Issuer.
"Termination Notice" has the meaning specified in Section 6.01(d).
"Third Party" means any third party, including any electric generation
supplier, providing billing or metering services, licensed by the PUC pursuant
to relevant provisions of the Statute and any PUC order.
"Transfer Date" means each date on which the Seller sells, conveys, or
otherwise transfers any Intangible Transition Property to any Issuer.
"Transition Bonds" means "transition bonds" (as defined in the Statute)
issued by any Issuer.
"UCC" means, unless the context otherwise requires, the Uniform Commercial
Code, as in effect in the relevant jurisdiction, as amended from time to time.
SECTION 1.02. Other Definitional Provisions. (a) 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, Annex, Schedule and Exhibit references contained in
this Agreement are references to Sections, Annexes, Schedules and Exhibits in
14
or to this Agreement unless otherwise specified; and the term "including" shall
mean "including without limitation".
(b) 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 genders of such terms.
ARTICLE II
Appointment and Authorization of Servicer
SECTION 2.01. Appointment of Servicer; Acceptance of Appointment. Subject
to Section 5.04 and Article VI, each Issuer hereby appoints the Servicer, and
the Servicer hereby accepts such appointment, to perform the Servicer's
obligations pursuant to this Agreement on behalf of and for the benefit of each
Issuer in accordance with the terms of this Agreement. 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
Serviced Intangible Transition Property, the Servicer shall be, and hereby is,
authorized and empowered by each Issuer to (a) execute and deliver, on behalf of
itself or such Issuer, as the case may be, any and all instruments, documents or
notices, and (b) on behalf of itself or such Issuer, as the case may be, make
any filing and participate in proceedings of any kind with any
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governmental authorities, including with the PUC. Each Issuer shall furnish the
Servicer with such documents as have been prepared by the Servicer for execution
by such Issuer, and with such other documents as may be in such Issuer's
possession, as necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties hereunder. Upon the written request of the
Servicer, each Issuer 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 Serviced Intangible Transition
Property. Notwithstanding any other provision herein, the Servicer and each
Issuer agree that such Issuer shall have dominion and control over its
respective Serviced Intangible Transition Property, and the Servicer, in
accordance with the terms hereof, is acting solely as the servicing agent of
such Issuer with respect to the Serviced Intangible Transition Property owned by
such Issuer. The Servicer hereby agrees that it 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 any Issuer in its
respective Serviced Intangible Transition Property, in each case unless such
action is required by law or court or regulatory order.
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ARTICLE III
Billing Services
SECTION 3.01. Duties of Servicer. The Servicer, as agent for each Issuer
(to the extent provided herein), shall have the following duties:
(a) Duties of Servicer Generally. The Servicer will manage, service,
administer and make collections in respect of the Serviced Intangible
Transition Property. The Servicer's duties will include (i) calculating and
billing the Intangible Transition Charges and collecting (from Customers
and Third Parties, as applicable) and posting all ITC Collections; (ii)
responding to inquiries by Customers, Third Parties, the PUC, or any
Federal, local or other state governmental authorities with respect to the
Serviced Intangible Transition Property and Intangible Transition Charges;
(iii) accounting for ITC Collections, investigating delinquencies,
processing and depositing collections and making periodic remittances,
furnishing periodic reports to the Issuers, the Bond Trustees and the
Rating Agencies; (iv) selling, as the agent for each Issuer, as its
interest may appear, defaulted or written off accounts in accordance with
the Servicer's usual and customary practices; and (v) taking action in
connection with
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Intangible Transition Charge Adjustments as set forth herein. Anything to
the contrary notwithstanding, the duties of the Servicer set forth in this
Agreement shall be qualified in their entirety by any PUC 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 hereby agrees that it shall also have, and shall comply with, the
duties and responsibilities relating to data acquisition, usage and ▇▇▇▇
calculation, billing, customer service functions, collections, payment
processing and remittance set forth in Exhibit A hereto.
(b) Notification of Laws and Regulations. The Servicer shall
immediately notify the Issuers, the Bond Trustees and the Rating Agencies
in writing of any laws or PUC Regulations hereafter promulgated that have a
material adverse effect on the Servicer's ability to perform its duties
under this Agreement.
(c) Other Information. Upon the reasonable request of any Issuer, any
Bond Trustee or any Rating Agency, the Servicer shall provide to such
Issuer, such Bond Trustee or such Rating Agency, as the case may be, any
public financial information in respect of the Servicer, or any material
information regarding the
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Intangible Transition Property to the extent it is reasonably available to
the Servicer, as may be reasonably necessary and permitted by law for such
Issuer, such Bond Trustee or such Rating Agency to monitor the performance
by the Servicer hereunder. In addition, so long as any of the Transition
Bonds of any Series are outstanding, the Servicer shall provide each Issuer
and each Bond 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 Intangible Transition
Charges applicable to each Rate Class.
SECTION 3.02. Collection and Allocation of Intangible Transition Charges.
(a) The Servicer shall use all reasonable efforts consistent with its customary
servicing procedures to collect all amounts owed in respect of Intangible
Transition Charges as and when the same shall become due and shall follow such
collection procedures as it follows with respect to collection activities that
the Servicer conducts for itself or others. The Servicer shall not change the
amount of or reschedule the due date of any scheduled payment of Intangible
Transition Charges, except as contemplated in this Agreement or as required by
law or court or PUC order; provided, however, that the Servicer may take any of
the foregoing actions to the extent that such
19
action would be in accordance with customary billing and collection practices of
the Servicer with respect to billing and collection activities that it conducts
for itself.
(b) Any amounts received by the Servicer from a Customer that represent a
partial payment toward an outstanding balance will be applied first to state tax
charges, then Intangible Transition Charges, then to Competitive Transition
Charges, then to transmission and distribution charges and finally to electric
generation charges. Notwithstanding the foregoing, when PECO Energy is providing
billing for its transmission and distribution charges which is separate from
billing for generation, any amounts received from Customers remitting partial
payments will be applied in the following priority: (i) to the outstanding
balance before direct access to electric generation from electric generation
suppliers or the installment amount for a payment agreement on such balance;
(ii) to the balance due for state tax charges; (iii) to the balance due or the
instalment amount for a payment agreement for Intangible Transition Charges;
(iv) to the balance due or the instalment amount for a payment agreement for
Competitive Transition Charges; (v) to the balance due or the instalment amount
for a payment agreement for fixed and variable utility distribution service
charges; (vi) to the current state tax charges; (vii) to the current Intangible
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Transition Charges; and (viii) to the current Competitive Transition Charges;
(ix) to the current fixed and variable utility distribution service charges; (x)
to the balance due for prior charges for energy and capacity (if PECO Energy is
the provider of last resort); (xi) to the current charges for energy and
capacity charges (if PECO Energy is the provider of last resort); and (xii) to
the non-basic service charges.
(c) Any ITC Collections received by the Servicer during any Collection
Period shall be allocated between the Issuers based on their respective
Percentages with respect to the Collection Period during which such ITC
Collections were expected to be collected.
SECTION 3.03. Servicing and Maintenance Standards. The Servicer shall, on
behalf of each Issuer, (a) manage, service, administer and make collections in
respect of the Serviced Intangible Transition Property with reasonable care and
in material compliance with applicable law, including all applicable PUC
Regulations and guidelines, using the same degree of care and diligence that the
Servicer exercises with respect to billing and collection activities that the
Servicer conducts for itself and others; (b) follow standards, policies and
procedures in performing its duties as Servicer that are customary in the
Servicer's industry; (c) use all reasonable efforts,
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consistent with its customary servicing procedures, to enforce and maintain
rights in respect of the Intangible Transition Property; and (d) calculate
Intangible Transition Charges in compliance with the Statute, the Qualified Rate
Orders and any applicable tariffs, except where the failure to comply with any
of the foregoing would not adversely affect any Issuer's or any Bond Trustee's
interest in the Serviced Intangible Transition Property. 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 of the Serviced
Intangible Transition Property, which, in the Servicer's judgment, may include
the taking of legal action pursuant to Section 3.09 hereof or otherwise.
SECTION 3.04. Servicer's Certificates. (a) The Servicer will provide to
each Issuer, the Bond Trustee under the Indenture to which such Issuer is a
party, and each of the Rating Agencies the statements and certificates specified
in the Issuer Annex for such Issuer.
SECTION 3.05. Annual Statement as to Compliance; Notice of Default. (a) The
Servicer shall deliver to each Issuer, each Bond Trustee and each Rating Agency,
on or before March 31 of each year beginning March 31, 1999, an Officers'
Certificate, stating that (i) a review of the activities of the Servicer during
the preceding calendar
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year (or relevant portion thereof) and of its performance under this Agreement
has been made under such officers' supervision and (ii) to the best of such
officers' knowledge, based on such review, the Servicer has fulfilled all its
obligations under this Agreement throughout such period or, if there has been a
default in the fulfillment of any such obligation, describing each such default.
(b) The Servicer shall deliver to each Issuer, each Bond Trustee and each
Rating Agency, promptly after having obtained knowledge thereof, but in no event
later than five Business Days thereafter, written notice in an Officers'
Certificate of any event which with the giving of notice or lapse of time, or
both, would become a Servicer Default under Section 6.01.
SECTION 3.06. Annual Independent Certified Public Accountants' Report. (a)
The Servicer shall cause a firm of independent certified public accountants
(which may also provide other services to the Servicer or the Seller) to
prepare, and the Servicer shall deliver to each Issuer, each Bond Trustee and
each Rating Agency, on or before March 31 of each year, beginning March 31, 2000
to and including the March 31 succeeding the retirement of all Transition Bonds,
a report addressed to the Servicer (the "Annual Accountant's Report"), which may
be included as part of the Servicer's customary auditing activities, to the
effect that such firm
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has performed certain procedures in connection with the Servicer's compliance
with its obligations under this Agreement during the preceding calendar year
ended December 31 (or, in the case of the first Annual Accountant's Report, the
period of time from the first Transfer Date until December 31, 1999),
identifying the results of such procedures and including any exceptions noted.
In the event such accounting firm requires any Bond Trustee or any Issuer to
agree or consent to the procedures performed by such firm, such Issuer shall
direct the applicable Bond Trustee in writing to so agree; it being understood
and agreed that such Bond Trustee will deliver such letter of agreement or
consent in conclusive reliance upon the direction of such Issuer, and neither
such Bond Trustee nor such Issuer will 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 3.07. Intangible Transition Property Documentation. To assure
uniform quality in servicing the
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Serviced Intangible Transition Property and to reduce administrative costs, the
Servicer shall keep on file, in accordance with its customary procedures, all
documents relating to the Intangible Transition Property, including copies of
the Qualified Rate Orders and all documents filed with the PUC in connection
with any Intangible Transition Charges Adjustment (collectively, the "Intangible
Transition Property Documentation").
SECTION 3.08. Computer Records; Audits of Documentation. (a) Safekeeping.
The Servicer shall maintain accurate and complete accounts, records and computer
systems pertaining to the Intangible Transition Property and the Intangible
Transition Property Documentation in accordance with its standard accounting
procedures and in sufficient detail to permit reconciliation between payments or
recoveries on (or with respect to) Intangible Transition Charges and the ITC
Collections from time to time remitted to each Bond Trustee pursuant to Section
5.10 and to enable each Issuer to comply with this Agreement and the Indenture
to which it is a party. The Servicer shall conduct, or cause to be conducted,
periodic audits of the Intangible Transition Property Documentation held by it
under this Agreement and of the related accounts, records and computer systems,
in such a manner as shall enable each Issuer and each Bond Trustee, as pledgee
of the
25
applicable Issuer, to verify the accuracy of the Servicer's record keeping. The
Servicer shall promptly report to each Issuer and each Bond Trustee any failure
on the Servicer's part to hold the Intangible Transition Property Documentation
and 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 any
Issuer or any Bond Trustee of the Intangible Transition Property Documentation.
(b) Maintenance of and Access to Records. The Servicer shall maintain the
Intangible Transition Property Documentation at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ or at such other office as shall be specified to each
Issuer and each Bond Trustee by written notice not later than 30 days prior to
any change in location. The Servicer shall permit each Issuer and each Bond
Trustee or their respective duly authorized representatives, attorneys, agents
or auditors at any time during normal business hours to inspect, audit and make
copies of and abstracts from the Servicer's records regarding the Intangible
Transition Property and Intangible Transition Charges and the Intangible
Transition Property Documentation. The failure of the Servicer to provide access
to such information as a result of an obligation or applicable law (including
PUC
26
Regulations) prohibiting disclosure of information regarding customers shall not
constitute a breach of this Section 3.08(b).
SECTION 3.09. Defending Intangible Transition Property Against Claims. The
Servicer shall institute any action or proceeding necessary to compel
performance by the PUC or the Commonwealth of Pennsylvania of any of their
obligations or duties under the Statute or the Qualified Rate Orders with
respect to the Intangible Transition Property. The costs of any such action
reasonably allocated by the Servicer to the Serviced Intangible Transition
Property, based on the ratio the Serviced Intangible Transition Property bears
to the total Intangible Transition Property, shall be payable from ITC
Collections as an Operating Expense in accordance with the Indentures and shall
be allocated among the Issuers based on the ratio the outstanding principal
amount of Transition Bonds issued by each such Issuer bears to the aggregate
outstanding principal amount of Transition Bonds issued by all the Issuers at
the time such costs are incurred. The Servicer's obligations pursuant to this
Section 3.09 shall survive and continue notwithstanding the fact that the
payment of Operating Expenses pursuant to the Indentures may be delayed (it
being understood that the Servicer may be required to advance its own funds to
satisfy its obligations hereunder).
27
SECTION 3.10. Opinions of Counsel. The Servicer shall deliver to each
Issuer and each Bond Trustee:
(a) promptly after the execution and delivery of this Agreement
and of each amendment hereto, promptly after the execution of each Sale
Agreement and of each amendment thereto and on each Transfer Date, an
Opinion of Counsel either (i) to the effect that, in the opinion of such
counsel, all filings, including filings with the PUC pursuant to the
Statute, that are necessary to fully preserve and protect the interests
of each Bond Trustee in the Serviced Intangible Transition Property have
been executed and filed, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given,
or (ii) to the effect that, in the opinion of such counsel, no such
action shall be necessary to preserve and protect such interest; and
(b) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months
after the first Transfer Date, an Opinion of Counsel, dated as of a date
during such 90-day period, either (i) to the effect that, in the opinion
of such counsel, all filings with the PUC pursuant to the Statute, have
been executed and filed that are necessary to preserve fully
28
and protect fully the interest of each Bond Trustee in the Serviced
Intangible Transition Property, and reciting the details of such filings
or referring to prior Opinions of Counsel in which such details are
given, or (ii) to the effect that, in the opinion of such counsel, no
such action shall be necessary to preserve and protect such interest.
Each Opinion of Counsel referred to in clause (a) or (b) above shall
specify any action necessary (as of the date of such opinion) to be taken in the
following year to preserve and protect such interest.
ARTICLE IV
Services Related to Intangible
Transition Charges Adjustments
SECTION 4.01. Intangible Transition Charges Adjustments. The Servicer shall
perform the calculations and take the actions relating to revising the
Intangible Transition Charges, in each case set forth in each Issuer Annex to
this Agreement.
ARTICLE V
The Servicer
SECTION 5.01. Representations and Warranties of Servicer. The Servicer
makes the following representations and warranties as of each Transfer Date, on
which the Issuers have relied and will rely in acquiring Serviced
29
Intangible Transition Property. The representations and warranties shall survive
the sale of any of the Serviced Intangible Transition Property to any Issuer and
the pledge thereof to any Bond Trustee pursuant to any Indenture.
(a) Organization and Good Standing. The Servicer is a corporation duly
organized and in good standing under the laws of the state of its
incorporation, with the corporate 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 has the power, authority and legal
right to service the Serviced Intangible Transition Property.
(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 owner ship or
lease of property or the conduct of its business (including the servicing
of the Serviced Intangible Transition Property as required by this
Agreement) requires 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, properties or prospects or adversely affect
30
the servicing of the Serviced Intangible Transition Property).
(c) Power and Authority. The Servicer has the corporate 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.
(d) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Servicer enforceable against the Servicer in
accordance with its terms subject to bankruptcy, receivership, insolvency,
fraudulent transfer, reorganization, moratorium or other laws affecting
creditors' rights generally from time to time in effect and to general
principles of equity (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 shall not conflict
with, result in any breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time) a default under, the
articles of incorporation or by-laws of the Servicer, or any indenture,
agreement or other instrument to which the
31
Servicer is a party or by which it shall be bound; nor result in the
creation or imposition of any Lien (other than the lien of the Mortgage on
the Servicer's interest in this Agreement) upon any of its properties
pursuant to the terms of any such indenture, agreement or other instrument;
nor 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) Approvals. Except for filings with the PUC for revised Intangible
Transition Charges pursuant to Section 4.01 and the Issuer Annexes and UCC
continuation filings, 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 execution and delivery by the Servicer of this
Agreement, the performance by the Servicer of the transactions contemplated
hereby or the fulfillment by the Servicer of the terms hereof, except those
that have been obtained or made.
(g) No Proceedings. There are no proceedings or investigations pending
or, to the Servicer's best
32
knowledge, threatened before any court, Federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Servicer or its properties: (i) except as disclosed
by the Servicer to the Issuers, seeking any determination or ruling that
might materially and adversely affect the performance by the Servicer of
its obligations under, or the validity or enforceability against the
Servicer of this Agreement or (ii) relating to the Servicer and which might
adversely affect the Federal or state income tax attributes of the
Transition Bonds.
(h) Reports and Certificates. Each report and certificate delivered in
connection with any filing made to the PUC by the Servicer on behalf of any
Issuer with respect to Intangible Transition Charges or Intangible
Transition Charges Adjustments will constitute a representation and
warranty by the Servicer that each such report or certificate, as the case
may be, is true and correct in all material respects; 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,
33
forecasts or other predictions of future events are reasonable based
upon historical performance.
SECTION 5.02. Indemnities of Servicer; Release of Claims. (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 each Issuer and each Bond Trustee, for
itself and on behalf of the Transition Bondholders for which it acts as Bond
Trustee, and each of their respective trustees, officers, directors and agents
for, and defend and hold harmless each such Person from and against, any and all
Losses that may be imposed upon, incurred by or asserted against any such Person
as a result of (i) the Servicer's wilful misfeasance, bad faith or gross
negligence in the performance of its duties or observance of its covenants under
this Agreement or the Servicer's 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) If any action, claim, demand or proceeding (including any governmental
investigation) shall be brought or asserted against a party (the "indemnified
party") entitled to any indemnification provided for under this Section 5.02,
such indemnified party shall promptly notify the Servicer in writing; provided,
however, that failure to
34
give such notification shall not affect the indemnification provided hereunder
except to the extent the Servicer shall have been actually prejudiced as a
result of such failure.
(d) The Servicer shall indemnify the Bond Trustees and their respective
officers, directors and agents for, and defend and hold harmless each such
Person from and against, any and all Losses that may be imposed upon, incurred
by or asserted against any such Person as a result of the acceptance or
performance of the trusts and duties contained herein and in the Indenture,
except to the extent that any such Loss shall be due to the wilful misfeasance,
bad faith or gross negligence of the applicable Bond Trustee. Such amounts with
respect to the Bond Trustee of the First Issuer shall be deposited and
distributed in accordance with the Indenture to which such Bond Trustee is a
party.
(e) The Servicer's indemnification obligations under Section 5.02(b) and
(d) for events occurring prior to the removal or resignation of any Bond Trustee
or the termination of this Agreement with respect to any Issuer shall survive
the resignation or removal of such Bond Trustee or the termination of this
Agreement with respect to such Issuer and shall include reasonable costs, fees
and expenses of investigation and litigation (including any
35
Issuer's and any Bond Trustee's reasonable attorneys' fees and expenses).
(f) Except to the extent expressly provided for in this Agreement, the Sale
Agreements or the Formation Documents (including the Servicer's claims with
respect to the Monthly Servicing Fees and the Seller's claim for payment of the
purchase price of Intangible Transition Property), the Servicer hereby releases
and discharges each Issuer (including its respective trustees, officers,
directors and agents, if any), and each Bond Trustee (including its respective
officers, directors and agents) (collectively, the "Released Parties") from any
and all actions, claims and demands whatsoever, which the Servicer, in its
capacity as Servicer or Seller, shall or may have against any such Person
relating to the Serviced Intangible Transition Property or the Servicer's
activities with respect thereto other than any actions, claims and demands
arising out of the wilful misconduct, bad faith or gross negligence of the
Released Parties.
SECTION 5.03. Merger or Consolidation of, or Assumption of the Obligations
of, Servicer. Any Person (a) into which the Servicer may be merged or
consolidated and which succeeds to the major part of the electric distribution
business of the Servicer, (b) which results from the division of the Servicer
into two or more Persons
36
and which succeeds to the major part of the electric distribution business of
the Servicer, (c) which may result from any merger or consolidation to which the
Servicer shall be a party and which succeeds to the major part of the electric
distribution business of the Servicer, (d) which may succeed to the properties
and assets of the Servicer substantially as a whole and which succeeds to the
major part of the electric distribution business of the Servicer or (e) which
may otherwise succeed to the major part of the electric distribution business of
the 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 representation and
warranty made pursuant to Section 5.01 shall have been breached and 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 each Issuer and each Bond 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
5.03 and that all conditions precedent
37
provided for in this Agreement relating to such transaction have been complied
with, (iii) the Rating Agencies shall have received prior written notice of such
transaction, (iv) the Servicer shall have delivered to each Issuer, each Bond
Trustee and each Rating Agency an Opinion of Counsel either (A) stating that, in
the opinion of such counsel, all filings, including filings with the PUC
pursuant to the Statute, have been executed and filed that are necessary to
preserve fully and protect fully the interests of each Issuer in the Serviced
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 above referenced agreement of assumption and
compliance with clauses (i), (ii), (iii) and (iv) above shall be conditions
precedent to the consummation of the transactions referred to in clause (a),
(b), (c), (d) or (e) above.
SECTION 5.04. Assignment of Servicer's Obligations. Pursuant to paragraph
13 of each Qualified Rate Order in which the PUC authorizes PECO Energy to
contract with an alternative party to perform PECO Energy's obligations
contemplated in such Qualified Rate Order, the Servicer may assign its
obligations hereunder to any
38
electric distribution company (as such term is defined in the Statute) which
succeeds to the major part of PECO Energy's electric distribution business.
Prior to any such assignment, the Servicer shall provide written notice thereof
to each of the Rating Agencies.
SECTION 5.05. Limitation on Liability of Servicer and Others. The Servicer
shall not be liable to any Issuer, 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 against any liability that would otherwise be
imposed by reason of wilful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of reckless disregard of obligations and
duties under this Agreement. 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 Bond Trustees or on any document of any
kind, prima facie properly executed and submitted by any Person, respecting any
matters arising under this Agreement.
Except as provided in this Agreement, the Servicer shall not be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its duties to service the Serviced Intangible Transition Property
in
39
accordance with this Agreement or related to its obligation to pay
indemnification, and that in its reasonable opinion may cause it to incur any
expense or liability.
SECTION 5.06. PECO Energy Not To Resign as Servicer. Subject to the
provisions of Sections 5.03 and 5.04, PECO Energy shall not resign from the
obligations and duties hereby imposed on it as Servicer under this Agreement
except upon a determination that the performance of its duties under this
Agreement shall no longer be permissible under applicable law. Notice of any
such determination permitting the resignation of PECO Energy shall be
communicated to each Issuer, each Bond Trustee and each Rating Agency 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 each Issuer and each Bond Trustee concurrently with or promptly
after such notice. No such resignation shall become effective until a successor
Servicer shall have assumed the servicing obligations and duties hereunder of
PECO Energy in accordance with Section 6.04.
SECTION 5.07. Monthly Servicing Fee. Each Issuer, severally and not
jointly, agrees to pay the Servicer, solely to the extent amounts are available
40
therefor in accordance with the Indenture to which such Issuer is a party, the
Monthly Servicing Fees with respect to all Series of Transition Bonds issued by
such Issuer. The Monthly Servicing Fee with respect to a Series for a Monthly
Allocation Date shall equal the product of (a) 1/12, (b) the Servicing Fee Rate
for such Series and (c) the outstanding principal amount of the Transition Bonds
of such Series as of such Monthly Allocation Date. The Servicer will be entitled
to retain as additional compensation net investment income on ITC Collections
related to Serviced Intangible Transition Property received by the Servicer
prior to each Remittance Date and the late fees, if any, paid by Customers to
the Servicer. The foregoing fees constitute a fair and reasonable price for the
obligations to be performed by the Servicer.
SECTION 5.08. Servicer Expenses. Except as otherwise expressly provided
herein, the Servicer shall be required to pay all expenses incurred by it in
connection with its activities hereunder, including fees and disbursements of
independent accountants and counsel, taxes imposed on the Servicer and expenses
incurred in connection with reports to Transition Bondholders.
SECTION 5.09. Appointments. The Servicer may at any time appoint a
subservicer to perform all or any portion of its obligations as Servicer
hereunder; provided, however,
41
that the Rating Agency Condition shall have been satisfied in connection
therewith with respect to all Rating Agencies other than Moody's (and the
Servicer shall have furnished Moody's with written notice of such appointment
prior to its effectiveness); provided further that the Servicer shall remain
obligated and be liable to each Issuer for the servicing and administering of
the Serviced Intangible Transition Property in accordance with the provisions
hereof without diminution of such obligation and liability by virtue of the
appointment of such subservicer and to the same extent and under the same terms
and conditions as if the Servicer alone were servicing and administering the
Serviced Intangible Transition Property. The fees and expenses of the
subservicer shall be as agreed between the Servicer and its subservicer from
time to time, and no Issuer (or trustee thereof, if any), Bond Trustee or
Transition Bondholder shall have any responsibility therefor.
SECTION 5.10. Remittances. (a) Subject to Section 5.07, the Servicer shall
remit all ITC Collections (from whatever source) allocated to each Issuer
pursuant to Section 3.02 and all proceeds of other Collateral of such Issuer, if
any, received by the Servicer to the Bond Trustee under the Indenture to which
such Issuer is a party, for
42
deposit pursuant to such Indenture, not later than the second Business Day after
receipt thereof.
(b) Notwithstanding the foregoing clause (a), (i) as long as PECO Energy or
any successor to PECO Energy's electric distribution business remains the
Servicer, (ii) no Servicer Default has occurred and is continuing and (iii) (A)
PECO Energy or such successor maintains a short-term rating of "A-1" or better
by Standard & Poor's, "P-1" or better by Moody's and, if rated by Fitch IBCA,
"F-2" by Fitch IBCA (and for five Business Days following a reduction in any
such rating) or (B) the Rating Agency Condition shall have been satisfied (and
any conditions or limitations imposed by the Rating Agencies in connection
therewith are complied with), the Servicer need not make the daily remittances
required by such clause (a), but in lieu thereof, shall remit all ITC
Collections (from whatever source) allocated to each Issuer pursuant to Section
3.02 and all proceeds of other Collateral of such Issuer, if any, received by
the Servicer during each Collection Period and any such amounts received in
prior Collection Periods but not so remitted to the Bond Trustee under the
Indenture to which such Issuer is a party, for deposit pursuant to such
Indenture, not later than the final day of such Collection Period or, if any
such day is not a Business Day, the next succeeding Business Day.
43
SECTION 5.11. Servicer Advances. The Servicer shall make advances of
interest or principal on the Transition Bonds of any Series in the manner and to
the extent, if any, specified in any Annex to this Agreement entered into in
connection with the issuance of such Transition Bonds.
SECTION 5.12. Protection of Title. The Servicer shall execute and file such
filings, including filings with the PUC pursuant to the Statute, 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 each
Issuer in its respective Serviced Intangible Transition Property, including all
filings required under the Statute relating to the transfer of the ownership or
security interest in the Serviced Intangible Transition Property by the Seller
to such Issuer or any security interest granted by such Issuer in its Serviced
Intangible Transition Property. The Servicer shall deliver (or cause to be
delivered) to the applicable Issuers file-stamped copies of, or filing receipts
for, any document filed as provided above, as soon as available following such
filing.
44
ARTICLE VI
Servicer Default
SECTION 6.01. Servicer Default. If any one of the following events (a
"Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to remit to any Bond Trustee on behalf
of an Issuer 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 such Issuer or Bond Trustee; or
(b) any failure by the Servicer or, so long as the Seller and the
Servicer are the same Person, the Seller, as applicable, duly to observe or
perform in any material respect any other covenant or agreement of the
Servicer or the Seller, as the case may be, set forth in this Agreement or
any other Basic Document to which it is a party, which failure shall (i)
materially and adversely affect the Intangible Transition Property and (ii)
continue unremedied for a period of 30 days after written notice of such
failure shall have been given to the Servicer or the Seller, as the case
may be, by any Issuer or any Bond Trustee or after discovery of such
failure by an officer of the Servicer or the Seller, as the case may be; or
45
(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 any of the Issuers or the Transition Bondholders
and which material adverse effect continues unremedied for a period of 60
days after the date on which written notice thereof shall have been given
to the Servicer by any Issuer or any Bond Trustee; or
(d) an Insolvency Event occurs with respect to the Servicer;
then, and in each and every case, so long as the Servicer Default shall not have
been remedied, Bond Trustees, as assignees of the applicable Issuers, with
respect to Holders of a majority of the outstanding principal amount of the
Transition Bonds, by notice then given in writing to the Servicer (a
"Termination Notice") may terminate all the rights and obligations (other than
the indemnification obligations set forth in Section 5.02 hereof and the
obligation under Section 6.02 to continue performing its functions as Servicer
until a successor Servicer is appointed) of the Servicer under this Agreement
with respect to all the Issuers. In addition, upon a Servicer Default described
in Section 6.01(a), each of the following shall be entitled to apply to the PUC
for sequestration and payment of revenues arising with respect to the Serviced
Intangible
46
Transition Property: (i) each Issuer or its assignees or (ii) pledgees or
transferees, including transferees under the Statute, of the Serviced 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 with
respect to the Issuers, whether with respect to the Serviced Intangible
Transition Property, the related Intangible Transition Charges or otherwise,
shall, upon appointment of a successor Servicer pursuant to Section 6.02,
without further action, pass to and be vested in such successor Servicer and,
without limitation, each Bond Trustee is hereby 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 things necessary or appropriate to effect the
purposes of such Termination Notice, whether to complete the transfer of the
Intangible Transition Property Documentation and related documents, or
otherwise. The predecessor Servicer shall cooperate with the successor Servicer,
the Bond Trustees and the Issuers 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 all
cash amounts that shall at the time be held by the predecessor
47
Servicer for remittance, or shall thereafter be received by it with respect to
the Serviced Intangible Transition Property or the related Intangible Transition
Charges. As soon as practicable after receipt by the Servicer of such
Termination Notice, the Servicer shall deliver the Intangible Transition
Property Documentation to the successor Servicer. All reasonable costs and
expenses (including attorneys fees and expenses) incurred in connection with
transferring the Intangible Transition Property Documentation 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. Termination
of PECO Energy as Servicer shall not terminate PECO Energy's rights or
obligations as Seller under any of the Sale Agreements.
SECTION 6.02. Notice of Servicer Default. The Servicer shall deliver to
each Issuer, each Bond Trustee and each Rating Agency promptly after having
obtained knowledge thereof, but in no event later than five Business Days
thereafter, written notice in an Officers' Certificate of any event or
circumstance (such as a breach of any representation or warranty made by the
Servicer in this
48
Agreement) which, with the giving of notice or the passage of time, would become
a Servicer Default under Section 6.01.
SECTION 6.03. Waiver of Past Defaults. All the Bond Trustees acting
together may 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 remittances to any Bond Trustee of ITC Collections from Serviced
Intangible Transition Property in accordance with Section 5.10 of this
Agreement. 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 6.04. Appointment of Successor. (a) Upon the Servicer's receipt of
a Termination Notice, pursuant to Section 6.01 or the Servicer's resignation 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 portion of the Monthly Servicing Fees, 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, Bond Trustees, as assignees of the applicable Issuers, with
49
respect to Holders of a majority of the outstanding principal amount of the
Transition Bonds, shall appoint a successor Servicer, and the successor Servicer
shall accept its appointment by a written assumption in form acceptable to the
Issuers and the Bond Trustees. If, within 30 days after the delivery of the
Termination Notice, a new Servicer shall not have been appointed and accepted
such appointment, any Bond Trustee may petition the PUC 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
PUC Regulations to perform the duties of the Servicer pursuant to the Statute,
the Qualified Rate Orders and this Agreement, (ii) the Rating Agency Condition
shall have been satisfied with respect to all Rating Agencies other than Moody's
(and Moody's shall have been furnished with written notice of such appointment
prior to its effectiveness) and (iii) such Person enters into a servicing
agreement with the Issuers 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
50
the Monthly Servicing Fees and all the rights granted to the predecessor
Servicer by the terms and provisions of this Agreement.
(c) The successor Servicer may not resign unless it is prohibited from
serving as such by law.
SECTION 6.05. Cooperation with Successor. The Servicer covenants and agrees
with each Issuer that it will, on an ongoing basis, cooperate with the successor
Servicer and provide whatever information is, and take whatever actions are,
reasonably necessary to assist the successor Servicer in performing its
obligations hereunder.
ARTICLE VII
Miscellaneous Provisions
SECTION 7.01. Amendment. This Agreement may be amended by the Seller, the
Servicer and the Issuers, with the consent of all the Bond Trustees and, with
respect to any amendment which would materially adversely affect the rights of
any Counterparty under any Swap Agreement, the consent of each such Counterparty
(which consent shall not be unreasonably withheld). The Issuers shall furnish to
each of the Rating Agencies (i) prior to the execution of any such amendment or
consent, written notification of the substance thereof and (ii) promptly after
the execution of any such amendment or consent, a copy thereof.
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Prior to the execution of any amendment to this Agreement, the Issuers and
the Bond Trustees 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 and the Opinion of Counsel referred to in Section 3.10. The
Issuers and the Bond Trustees may, but shall not be obligated to, enter into any
such amendment which affects their own rights, duties or immunities under this
Agreement or otherwise.
SECTION 7.02. Notices. All demands, notices and communications upon or to
the Servicer, the Issuers, the Bond Trustees or the Rating Agencies under this
Agreement shall be in writing, delivered personally, via facsimile, reputable
overnight courier or by first class mail, postage prepaid, and shall be deemed
to have been duly given upon receipt (a) in the case of the Servicer, to PECO
Energy Company, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention of Vice
President, Finance and Treasurer, (b) in the case of any Issuer or any Bond
Trustee, at the address provided for notices or communications to such Person in
the Indenture to which such Person is a party, (c) in the case of Moody's, to
▇▇▇▇▇'▇ Investors Service, Inc., ABS Monitoring Department, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, (d) in the case of Standard & Poor's, to Standard &
Poor's Corporation, ▇▇ ▇▇▇▇▇▇▇▇ (▇▇▇▇ ▇▇▇▇▇), ▇▇▇ ▇▇▇▇,
52
New York 10004, Attention of Asset Backed Surveillance Department, (e) in the
case of Fitch IBCA, to Fitch IBCA, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, Attention of ABS Surveillance, and (f) in the case of Duff, to Duff
& ▇▇▇▇▇▇ Credit Rating Company, ▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ (▇▇▇▇ ▇▇▇▇▇), ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇; or, as to each of the foregoing, at such other address as shall
be designated by written notice to the other parties.
SECTION 7.03. Assignment. Notwithstanding anything to the contrary
contained herein, except as pro vided in Sections 5.03 and 5.04 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 7.04. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Servicer, the Issuers (including
their respective trustees, if any) and the Bond Trustees, on behalf of
themselves and the Transition Bondholders, 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 any Collateral or under or in
respect of this Agreement or any covenants, conditions or provisions contained
herein.
53
SECTION 7.05. 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 7.06. 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 7.07. 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 7.08. Governing Law. This Agreement shall be construed in
accordance with the laws of the Commonwealth of Pennsylvania, 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 7.09. Assignment to Bond Trustee. The Servicer hereby acknowledges
and consents to any mortgage,
54
pledge, assignment and grant of a security interest by any Issuer to any Bond
Trustee pursuant to any Indenture for the benefit of any Transition Bondholders
of all right, title and interest of such Issuer in, to and under the Serviced
Intangible Transition Property owned by such Issuer and the proceeds thereof and
the assignment of any or all of such Issuer's rights hereunder to such Bond
Trustee. In no event shall any Bond Trustee have any liability for the
representations, warranties, covenants, agreements or other obligations of any
Issuer, hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the applicable Issuer.
SECTION 7.10. Nonpetition Covenants. Notwithstanding any prior termination
of this Agreement or the Indenture, but subject to the PUC's rights to order the
sequestration and payment of revenues arising with respect to the Serviced
Intangible Transition Property notwithstanding any bankruptcy, reorganization or
other insolvency proceedings with respect to the debtor, pledgor or transferor
of the Serviced Intangible Transition Property pursuant to Section 2812(d)(3)(v)
of the Statute, the Servicer shall not, prior to the date which is one year and
one day after the termination of the applicable Indenture, petition or otherwise
invoke or cause any Issuer to invoke
55
the process of any court or government authority for the purpose of commencing
or sustaining a case against any 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 any Issuer or any
substantial part of the property of any Issuer, or ordering the winding up or
liquidation of the affairs of any Issuer.
SECTION 7.11. Addition of Issuers. Upon execution and delivery by the
Servicer and a Person which owns Intangible Transition Property sold to such
Person by the Seller of an instrument in the form of Exhibit B hereto, such
Person shall become an Issuer hereunder with the same force and effect as if
originally named as an Issuer herein. The execution and delivery of any such
instrument shall not require the consent of any Issuer hereunder. The rights and
obligations of each Issuer hereunder shall remain in full force and effect
notwithstanding the addition of any new Issuer as a party to this Agreement.
SECTION 7.12. Termination by Issuers. This Agreement shall terminate with
respect to any Issuer when all Transition Bonds issued by such Issuer have been
retired, redeemed or defeased in full.
SECTION 7.13. Limitation of Liability of Trustee. Notwithstanding anything
contained herein to the contrary,
56
this Agreement has been countersigned by First Union Trust Company, National
Association, not in its individual capacity but solely in its capacity as
trustee of the First Issuer and in no event shall First Union Trust Company,
National Association, in its individual capacity have any liability for
warranties, covenants, agreements or other obligations of the First Issuer
hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the First Issuer. For all purposes of this Agreement, in the performance of
its duties or obligations hereunder or in the performance of any duties or
obligations of the First Issuer hereunder, First Union Trust Company, National
Association, shall be subject to, and entitled to
57
the benefits of, the applicable terms and provisions of the Formation Documents
relating to the First Issuer.
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.
PECO ENERGY TRANSITION TRUST,
by First Union Trust Company,
National Association, not in
its individual capacity but
solely as Issuer Trustee on
behalf of PECO Energy
Transition Trust,
by
------------------------------
Title:
PECO ENERGY COMPANY, Servicer,
by
------------------------------
Title:
Acknowledged and Accepted:
THE BANK OF NEW YORK, not
in its individual capacity
but solely as Bond Trustee
on behalf of the Holders of
Transition Bonds issued by
the First Issuer,
by
-----------------------------
Title:
EXHIBIT B
Supplement for Addition of Issuer
SUPPLEMENT NO. __ dated as of [ ], to the Amended and
Restated Master Servicing Agreement dated as of [ ], 2000,
between [ ], a [state of formation] [type of entity] (the
"New Issuer") and PECO ENERGY COMPANY, a Pennsylvania
corporation as Servicer (the "Servicer").
A. Reference is made to the Amended and Restated Master Servicing Agreement
dated as of [ ], 2000 (as amended, supplemented or otherwise modified from time
to time, the "Servicing Agreement"), among PECO ENERGY TRANSITION TRUST, a
Delaware business trust (the "First Issuer"), the other Issuers from time to
time party thereto (together with the First Issuer, the "Issuers") and the
Servicer.
B. Capitalized terms used herein and not other wise defined herein shall
have the meanings assigned to such terms in the Servicing Agreement.
C. The Issuers have entered into the Servicing Agreement in order to
provide for servicing of the Serviced Intangible Transition Property. Section
7.11 of Servicing Agreement provides that additional Persons may become Issuers
under the Servicing Agreement by execution and delivery of an instrument in the
form of this Supplement. The New Issuer is executing this Supplement in
accordance
2
with the requirements of the Servicing Agreement to become an Issuer under the
Servicing Agreement in order to provide for the servicing of the Serviced
Intangible Transition Property owned by the New Issuer.
Accordingly, the Servicer and the New Issuer agree as follows:
SECTION 1. In accordance with Section 7.11 of the Servicing Agreement, the
New Issuer by its signature below becomes an Issuer under the Servicing
Agreement with the same force and effect as if originally named therein as an
Issuer and the New Issuer hereby agrees to all the terms and provisions of the
Servicing Agreement applicable to it as an Issuer thereunder. Each reference to
an "Issuer" in the Servicing Agreement shall be deemed to include the New
Issuer. The Servicing Agreement is hereby incorporated herein by reference.
SECTION 2. The New Issuer represents and warrants to the Servicer that this
Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms.
SECTION 3. This Supplement 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
3
agreement. This Supplement shall become effective when the Servicer shall have
received counterparts of this Supplement that, when taken together, bear the
signatures of the New Issuer and the Servicer.
SECTION 4. Except as expressly supplemented hereby, the Servicing Agreement
shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE COMMONWEALTH OF PENNSYLVANIA 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. Any provision of this Supplement that is prohibited or
unenforceable in any jurisdiction shall 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.
4
SECTION 7. All communications and notices here under shall be in writing
and given as provided in Section 7.02 of the Servicing Agreement.
IN WITNESS WHEREOF, the New Issuer and the Servicer have duly executed this
Supplement to the Servicing Agreement as of the day and year first above
written.
[Name Of New Issuer],
by
-----------------------------
Title:
PECO ENERGY COMPANY, Servicer,
by
------------------------------
Title:
ANNEX 1
to
MASTER SERVICING AGREEMENT
The Servicer agrees to comply with the following with respect to PECO Energy
Transition Trust (the "First Issuer"):
SECTION 1. Definitions. (a) Capitalized terms used herein and not otherwise
defined shall have the meanings set forth in the Amended and Restated Master
Servicing Agreement dated as of [ ], 2000 (the "Servicing Agreement"), among the
First Issuer, the other Issuers from time to time party thereto and PECO ENERGY
COMPANY, as Servicer.
(b) Whenever used in this Annex 1, the following words and phrases shall
have the following meanings:
"Adjustment Date" has the meaning specified in the Indenture.
"Adjustment Request" means an application filed by the Servicer with the
PUC for revised Intangible Transition Charges pursuant to Section 6(b) of this
Annex.
"Available Reserve Amount" means, as of any date, the amount on deposit in
the Reserve Subaccount less the product of (a) the Prepayment Amount and (b) the
difference, expressed as a percentage, between 100% and the Expected
Amortization Percentage for the immediately following Regulatory Year.
2
"Bond Trustee" has the meaning specified in the Indenture.
"Calculation Date" means, with respect to any Series of Transition Bonds,
such date or dates specified as such in the Series Supplement therefor.
"Calculated Overcollateralization Level" has the meaning set forth in the
Indenture.
"Class" has the meaning specified in the Indenture.
"Expected Amortization Percentage" means, with respect to any Regulatory
Year, the percentage equivalent of a fraction, the numerator of which is the
aggregate amount of Transition Bonds of all Series to be amortized during such
Regulatory Year as set forth in Expected Amortization Schedules therefor and the
denominator of which is the Projected Transition Bond Balance on the first day
of such Regulatory Year.
"Expected Amortization Schedule" has the meaning set forth in the
Indenture.
"Expected Final Payment Date" has the meaning set forth in the Indenture.
"Holder" or "Transition Bondholder" has the meaning set forth in the
Indenture.
"Indenture" means the Indenture dated as of March 1, 1999, between the
First Issuer and The Bank of
3
New York, as amended and supplemented from time to time, including any Series
Supplement.
"Overcollateralization Subaccount" has the meaning set forth in the
Indenture.
"Payment Date" has the meaning specified in the Indenture.
"Prepayment Amount" means, as of any date, the sum of all amounts currently
on deposit in the Reserve Subaccount arising from prepayment by customers
allocable to Intangible Transition Charges.
"Projected Transition Bond Balance" has the meaning specified in the
Indenture.
"Regulatory Period" means with respect to any Series (i) the period from
the Series Issuance Date therefor through and including the first Adjustment
Date (the "Initial Regulatory Period") and (ii) following the Initial Regulatory
Period until December 31, 2010, each period from and including each Adjustment
Date through but excluding the following Adjustment Date.
"Reserve Subaccount" has the meaning set forth in the Indenture.
"Sale Agreement" has the meaning set forth in the Indenture.
"Schedule Revision Date" has the meaning set forth in the Indenture.
4
"Series" has the meaning specified in the Indenture.
"Series Issuance Date" has the meaning specified in the Indenture.
"Series Supplement" has the meaning specified in the Indenture.
"Transferred ITP" has the meaning specified in the Sale Agreement.
"Transition Bonds" has the meaning specified in the Indenture.
"Transition Bond Balance" has the meaning specified in the Indenture.
SECTION 2. Calculation Date Statements. For each Calculation Date, the
Servicer will provide to the First Issuer and the Bond Trustee a statement
indicating (i) the Transition Bond Balance and the Projected Transition Bond
Balance for each Series as of the immediately preceding Payment Date, (ii) the
amount on deposit in the Overcollateralization Subaccount and the Calculated
Overcollateralization Level as of the immediately preceding Payment Date, (iii)
the Projected Transition Bond Balance for each Payment Date prior to the next
Adjustment Date and the Servicer's projection of the Transition Bond Balance as
of each Payment Date prior to the next Adjustment Date, (iv) the Calculated
Overcollateralization Level for each
5
Payment Date prior to the next Adjustment Date and the Servicer's projection of
the amount on deposit in the Overcollateralization Subaccount for each Payment
Date prior to the next Adjustment Date and (v) the projected ITC Collections
from the Payment Date immediately preceding the next Adjustment Date through
such Adjustment Date.
SECTION 3. Remittance Date Statements. On or before each Remittance Date,
the Servicer will prepare and furnish to the First Issuer and the Bond Trustee a
statement setting forth the aggregate amount remitted or to be remitted by the
Servicer to the Bond Trustee for deposit on such Remittance Date pursuant to
ss.5.10 of the Servicing Agreement and the Indenture.
SECTION 4. Monthly Allocation Date Statements. At least three Business Days
before each Monthly Allocation Date, the Servicer will prepare and furnish to
the First Issuer, the Bond Trustee, each Counterparty and the Rating Agencies a
statement setting forth the transfers and payments to be made on such Monthly
Allocation Date pursuant to Section 8.02(d) of the Indenture and the amounts
thereof.
SECTION 5. Payment Date Statements. At least three Business Days before
each Payment Date for each Series of Transition Bonds, the Servicer will
calculate the interest due on any floating rate Transition Bonds of such Series
and will prepare and furnish to the First Issuer and
6
the Bond Trustee a statement setting forth the amounts to be paid to Holders of
Transition Bonds of such Series pursuant to Section 8.02(e) of the Indenture.
SECTION 6. Intangible Transition Charges Adjustments. (a) Prior to each
Calculation Date, the Servicer shall calculate (i) the Transition Bond Balance
as of the Payment Date immediately preceding such Calculation Date (a written
copy of which shall be delivered by the Servicer to the Bond Trustee within five
days following such Calculation Date) and (ii) the revised Intangible Transition
Charges with respect to the Transferred Intangible Transition Property for the
then-current Regulatory Period and any subsequent Regulatory Periods until a
Payment Date occurs, such that the Servicer projects that ITC Collections
therefrom allocable to the First Issuer will be sufficient so that (x) the
outstanding principal balance of each outstanding Series will equal the amount
provided for in the Expected Amortization Schedule therefor and the amount on
deposit in the Overcollateralization Subaccount will equal the Calculated
Overcollateralization Level, by the next Adjustment Date or the immediately
succeeding Payment Date after such Adjustment Date as specified in the Series
Supplement therefor or, if earlier with respect to any Series or Class of
Transition Bonds, by the Expected Final
7
Payment Date therefor, taking into account the Available Reserve Amount.
(b) On each Calculation Date, the Servicer shall (i) file an Adjustment
Request with the PUC for such revised Intangible Transition Charges with respect
to the Transferred Intangible Transition Property to remain in effect until the
earlier of (A) the effective date of the next Intangible Transition Charges
Adjustment with respect to the Transition Bonds, (B) the Expected Final Payment
Date for any Series or Class of Transition Bonds and (C) December 31, 2010, (ii)
take all reasonable actions and make all reasonable efforts in order to
effectuate such revision to such Intangible Transition Charges and (iii)
promptly send to the Bond Trustee copies of all material notices and documents
relating to such revision.
SECTION 7. Servicer Advances. The Servicer shall not make any advances of
interest or principal on the Transition Bonds of any Series.
SECTION 8. Loss Calculations. Upon notice from the Seller, the Servicer
shall perform the calculations specified in Sections 5.01(c)(ii)(x) and
5.01(c)(ii)(y) of the Sale Agreement in the manner specified in such Sections
and notify the Issuer and the Bond Trustee thereof.
SECTION 9. Schedule Revision Date Schedules. Prior to each Schedule
Revision Date, the Servicer shall
8
deliver to the First Issuer a replacement Schedule 1 to the Indenture and
replacement Schedules A and B to each Series Supplement to which such Schedule
Revision Date applies, adjusted to reflect the event giving rise to such
Schedule Revision Date and setting forth the Expected Amortization Schedule for
each Payment Date and the Monthly Allocated Interest Balance and Monthly
Allocated Principal Balance for each Monthly Allocation Date applicable thereto;
provided, however, that no such replacement Schedules A and B shall be required
with respect to a Series if the event giving rise to such Schedule Revision Date
is a redemption of the Transition Bonds of such Series in whole.
