EXHIBIT 10(a)
SERIES 2003-1
TRANSITION PROPERTY PURCHASE AND SALE AGREEMENT
BETWEEN
ONCOR ELECTRIC DELIVERY TRANSITION BOND COMPANY LLC
ISSUER
AND
ONCOR ELECTRIC DELIVERY COMPANY
SELLER
DATED AS OF JULY __, 2003
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS.....................................................1
SECTION 1.01 Definitions...............................................1
SECTION 1.02 Other Definitional Provisions.............................2
ARTICLE II. CONVEYANCE OF THE SERIES 2003-1 TRANSITION PROPERTY.............3
SECTION 2.01 Conveyance of the Series 2003-1 Transition Property.......3
SECTION 2.02 Conveyance of Additional Transition Property..............3
SECTION 2.03 Conditions to Conveyance of the Series 2003-1
Transition Property.......................................3
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SELLER....................5
SECTION 3.01 Organization and Good Standing............................5
SECTION 3.02 Due Qualification.........................................5
SECTION 3.03 Power and Authority.......................................5
SECTION 3.04 Binding Obligation........................................5
SECTION 3.05 No Violation..............................................5
SECTION 3.06 No Proceedings............................................6
SECTION 3.07 Approvals.................................................6
SECTION 3.08 The Series 2003-1 Transition Property.....................6
SECTION 3.09 Limitations on Representations and Warranties............10
ARTICLE IV. COVENANTS OF THE SELLER........................................11
SECTION 4.01 Existence................................................11
SECTION 4.02 No Liens.................................................11
SECTION 4.03 Delivery of Collections..................................11
SECTION 4.04 Notice of Liens..........................................1l
SECTION 4.05 Compliance with Law......................................12
SECTION 4.06 Covenants Related to Bonds and the Series 2003-1
Transition Property......................................12
SECTION 4.07 Protection of Title......................................13
SECTION 4.08 Nonpetition Covenants....................................14
SECTION 4.09 Taxes....................................................14
SECTION 4.10 The Series ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇ Advice Letter.................14
SECTION 4.11 Tariff...................................................14
SECTION 4.12 Maintenance of Operations................................14
SECTION 4.13 Notice of Breach to Rating Agencies, Etc.................14
SECTION 4.14 Use of Proceeds..........................................14
SECTION 4.15 Further Assurances.......................................15
ARTICLE V. THE SELLER.....................................................15
SECTION 5.01 Liability of Seller; Indemnities.........................15
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SECTION 5.02 Merger, Conversion or Consolidation of, or
Assumption of the Obligations of, Seller.................17
SECTION 5.03 Conversion of the Seller to a Limited Liability
Company..................................................18
SECTION 5.04 Limitation on Liability of Seller and Others.............18
ARTICLE VI. MISCELLANEOUS PROVISIONS.......................................18
SECTION 6.01 Amendment................................................18
SECTION 6.02 PUCT Condition...........................................19
SECTION 6.03 Notices..................................................20
SECTION 6.04 Assignment...............................................21
SECTION 6.05 Limitations on Rights of Third Parties...................21
SECTION 6.06 Severability.............................................21
SECTION 6.07 Separate Counterparts....................................22
SECTION 6.08 Headings.................................................22
SECTION 6.09 Governing Law............................................22
SECTION 6.10 Assignment to Indenture Trustee..........................22
SECTION 6.11 Limitation of Liability..................................22
SECTION 6.12 Waivers..................................................22
EXHIBITS
Exhibit A Form of ▇▇▇▇ of Sale
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This SERIES 2003-1 TRANSITION PROPERTY PURCHASE AND SALE AGREEMENT (this
"Agreement"), dated as of July __, 2003, is between Oncor Electric Delivery
Transition Bond Company LLC, a Delaware limited liability company (the
"Issuer"), and Oncor Electric Delivery Company, a Texas corporation (together
with its successors in interest to the extent permitted hereunder, the
"Seller").
RECITALS
WHEREAS, the Issuer desires to purchase the Series 2003-1 Transition
Property (as defined herein) created pursuant to the Securitization Law and the
Financing Order;
WHEREAS, the Seller is willing to sell Series 2003-1 Transition Property to
the Issuer pursuant to the Securitization Law and the Financing Order;
WHEREAS, the Issuer, in order to finance the purchase of Series 2003-1
Transition Property, will issue the Series 2003-1 Bonds under the Indenture; and
WHEREAS, the Issuer, to secure its obligations under the Series 2003-1
Bonds and the Indenture, will pledge, among other things, all right, title and
interest of the Issuer in, to and under the Series 2003-1 Transition Property
and this Agreement to the Indenture Trustee for the benefit of the Series 2003-1
Bondholders.
NOW, THEREFORE, in consideration the mutual covenants herein contained, the
parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01 Definitions. (a) Unless otherwise defined herein, capitalized
terms used herein shall have the meanings assigned to them in Appendix A to the
Indenture dated as of the date hereof between the Issuer and The Bank of New
York, as Indenture Trustee, as the same may be amended, supplemented or modified
from time to time.
(b) Whenever used in this Agreement, the following words and phrases shall
have the following meanings:
"▇▇▇▇ of Sale" means a ▇▇▇▇ of sale substantially in the form of Exhibit A
hereto delivered pursuant to Section 2.03(a).
"Indemnified Person" has the meaning specified in Section 5.01(g).
"Losses" has the meaning specified in Section 5.01(d).
"Issuer" has the meaning set forth in the preamble of this Agreement.
"Seller" has the meaning set forth in the preamble of this Agreement.
"Servicing Agreement" means the Series 2003-1 Transition Property Servicing
Agreement between the Issuer and Oncor Electric Delivery Company dated as of the
date hereof.
"Series 2003-1 Bonds" means the Series 2003-1 Transition Bonds issued under
the Series 2003-1 Supplement.
"Series 2003-1 Capital Subaccount" means the Capital Subaccount established
with respect to the Series 2003-1 Bonds by the Series 2003-1 Supplement.
"Series 2003-1 Holder" or "Series 2003-1 Bondholder" means a person in
whose name a Series 2003-1 Bond is registered on the Securities Register.
"Series 2003-1 Issuance Advice Letter" means the Issuance Advice Letter
filed with the PUCT in connection with the Series 2003-1 Transition Charges and
the Series 2003-1 Bonds.
"Series Overcollateralization Account" means the Overcollaterization
Account established with respect to the Series 2003-1 Bonds by the Series 2003-1
Supplement.
"Series 2003-1 Supplement" means the Series 2003-1 Supplement to the
Indenture, dated July __, 2003.
"Series 2003-1 Transition Property" means the Transition Property sold,
transferred, assigned, set over and conveyed by the Seller to the Issuer as of
the Closing Date pursuant to this Agreement and identified on Schedule I to the
▇▇▇▇ of Sale.
"Series 2003-1 Transition Charges" shall have the meaning set forth in the
Servicing Agreement.
SECTION 1.02 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(b) 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".
(c) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms.
(d) Non-capitalized terms used herein that are defined in the Utilities
Code shall, as the context requires, have the meanings assigned to such terms in
the Utilities Code, but without giving effect to amendments to the Utilities
Code after the date hereof that have a material adverse effect on the Issuer or
the Series 2003-1 Holders.
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ARTICLE II.
CONVEYANCE OF THE SERIES 2003-1 TRANSITION PROPERTY
SECTION 2.01 Conveyance of the Series 2003-1 Transition Property. (a) In
consideration of the Issuer's delivery to or upon the order of the Seller of
$500,000,000, subject to the conditions specified in Section 2.03, the Seller
does hereby irrevocably sell, transfer, assign, set over and otherwise convey to
the Issuer, without recourse or warranty, except as set forth herein, all right,
title and interest of the Seller in, to and under the Series 2003-1 Transition
Property (such sale, transfer, assignment, setting over and conveyance of the
Series 2003-1 Transition Property includes, to the fullest extent permitted by
the Securitization Law, the right to impose, collect and receive Series 2003-1
Transition Charges and the assignment of all revenues, collections, claims,
rights, payments, money or proceeds of or arising from the Transition Charges
related to the Series 2003-1 Transition Property, as the same may be adjusted
from time to time). Such sale, transfer, assignment, setting over and conveyance
is hereby expressly stated to be a sale and, pursuant to Section 39.308 of the
Securitization Law, shall be treated as an absolute transfer of all of the
Seller's right, title and interest in, to and under (as in a true sale), and not
as a pledge or other financing of, the Series 2003-1 Transition Property. The
Seller and the Issuer agree that after giving effect to the sale, transfer,
assignment, setting over and conveyance contemplated hereby the Seller has no
right, title or interest in, to or under the Series 2003-1 Transition Property
to which a security interest could attach because (i) it has sold, transferred,
assigned, set over and conveyed all right, title and interest in, to and under
the Series 2003-1 Transition Property to the Issuer, (ii) as provided in Section
39.304 of the Securitization Law, such rights are only contract rights until the
time of such sale, transfer, assignment, setting over and conveyance and (iii)
as provided in Section 39.309(c) of the Securitization Law, appropriate notice
has been filed and such sale transfer assignment, setting over and conveyance is
perfected against all third parties, including subsequent judicial or other lien
creditors. If such sale, transfer, assignment, setting over and conveyance is
held by a court of competent jurisdiction not to be a true sale as provided in
Section 39.308 of the Securitization Law, then such sale, transfer, assignment,
setting over and conveyance shall be treated as the creation of a security
interest (within the meaning of the Securitization Law and the UCC) in the
Series 2003-1 Transition Property and, without prejudice to its position that it
has absolutely transferred all of its rights in the Series 2003-1 Transition
Property to the Issuer, the Seller hereby grants a security interest in the
Series 2003-1 Transition Property to the Issuer (and, to the extent necessary to
qualify the grant as a security interest under the Securitization Law, to the
Indenture Trustee for the benefit of the Series 2003-1 Bondholders).
(b) Subject to Section 2.03, the Issuer does hereby purchase the Series
2003-1 Transition Property from the Seller for the consideration set forth in
Section 2.01(a) above.
SECTION 2.02 Conveyance of Additional Transition Property. The Seller
may from time to time offer to sell, transfer, assign, set over and convey
additional Transition Property to the Issuer, pursuant to a separate agreement.
SECTION 2.03 Conditions to Conveyance of the Series 2003-1 Transition
Property. The obligation of the Issuer to purchase Series 2003-1 Transition
Property on the Closing Date shall be subject to the satisfaction or waiver by
the Issuer of each of the following conditions:
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(a) on or prior to the Closing Date, the Seller shall have delivered to
the Issuer a duly executed ▇▇▇▇ of Sale identifying the Series 2003-1 Transition
Property to be conveyed on the Closing Date;
(b) on or prior to the Closing Date, the Seller shall have received the
Financing Order creating the Series 2003-1 Transition Property;
(c) as of the Closing Date, (i) the Issuer shall have sufficient funds
available to pay the purchase price for the Series 2003-1 Transition Property
and (ii) all conditions to the issuance of the Series 2003-1 Bonds to set forth
in the Indenture shall have been satisfied or waived;
(d) on or prior to the Closing Date, the Seller shall have taken all
action required to transfer to the Issuer ownership of the Series 2003-1
Transition Property to be conveyed on such date, free and clear of all Liens
other than Liens created by the Issuer pursuant to the Indenture; and the Issuer
or the Servicer on behalf of the Issuer, shall have taken any action required
for the Issuer to grant to the Indenture Trustee a first priority perfected
security interest in the Series 2003-1 Collateral and maintain such security
interest as of such date;
(e) the Seller shall have delivered to the Rating Agencies and the
Issuer any Opinions of Counsel required by the Rating Agencies;
(f) the Seller shall have received and delivered to the Issuer and the
Indenture Trustee: (i) an opinion of outside tax counsel (as selected by the
Seller, and in form and substance reasonably satisfactory to the Issuer and the
Indenture Trustee) to the effect that the Issuer will not be subject to United
States federal income tax as an entity separate from its sole owner and that the
Series 2003-1 Bonds will be treated as debt of the Issuer's sole owner for
United States federal income tax purposes and (ii) an opinion of outside tax
counsel (as selected by the Seller, and in form and substance reasonably
satisfactory to the Issuer and the Indenture Trustee) or, if the Seller so
chooses, a ruling from the Internal Revenue Service, in either case to the
effect that, for United States federal income tax purposes, the issuance of the
Series 2003-1 Bonds will not result in gross income to the Seller. The opinions
of outside tax counsel described above may, if the Seller so chooses, be
conditioned on the receipt by the Seller of one or more letter rulings from the
Internal Revenue Service and in rendering such opinion outside tax counsel shall
be entitled to rely on the rulings contained in such letter ruling and to rely
on the representations made, and information supplied, to the Internal Revenue
Service in connection with such letter rulings;
(g) on and as of the Closing Date, each of the LLC Agreement, the
Servicing Agreement, this Agreement, the Indenture, the Financing Order, any
Tariff authorizing the collection of the Series 2003-1 Transition Charges and
the Securitization Law shall be in full force and effect;
(h) the Rating Agency Condition shall have been satisfied with respect
to such purchase; and
(i) the Seller shall have delivered to the Indenture Trustee and the
Issuer an Officers' Certificate confirming the satisfaction of each relevant
condition precedent specified in this Section 2.03.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Subject to Section 3.09, the Seller makes the following representations
and warranties as of the Closing Date, and the Seller acknowledges that the
Issuer has relied thereon in acquiring the Series 2003-1 Transition Property.
The representations and warranties shall survive the sale and transfer of Series
2003-1 Transition Property to the Issuer and the pledge thereof to the Indenture
Trustee pursuant to the Indenture. The Seller agrees that the Issuer will have
the right to assign the right to enforce the following representations and
warranties to the Indenture Trustee for the benefit of the Series 2003-1
Bondholders. The Seller agrees that the representations and warranties inure to
the benefit of the Issuer and the Indenture Trustee for the benefit of the
Series 2003-1 Bondholders.
SECTION 3.01 Organization and Good Standing. The Seller is duly
organized and validly existing and is in good standing under the laws of the
state of its organization, with the requisite corporate power and authority to
own its properties as such properties are currently owned and to conduct its
business as such business is now conducted by it, and has the requisite
corporate power and authority to obtain the Financing Order and own, sell and
transfer the Series 2003-1 Transition Property.
SECTION 3.02 Due Qualification. The Seller is duly qualified to do
business and is 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 or obtain such licenses and
approvals would not be reasonably likely to have a material adverse effect on
the Seller's business, operations, assets, revenues or properties).
SECTION 3.03 Power and Authority. The Seller has the requisite 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 all necessary corporate action on the part of the Seller
under its organizational or governing documents and laws.
SECTION 3.04 Binding Obligation. This Agreement and the ▇▇▇▇ of Sale
delivered on the Closing Date constitute a legal, valid and binding obligation
of the Seller enforceable against it in accordance with their terms, subject to
applicable insolvency, reorganization, moratorium, fraudulent transfer and other
laws relating to or affecting creditors' or secured parties' rights generally
from time to time in effect and to general principles of equity (including
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 ▇▇▇▇ of Sale delivered on the Closing
Date and the fulfillment of the terms hereof do not:
(a) conflict with or 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 Seller's organizational documents, or any indenture or other
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agreement or instrument to which the Seller is a party or by which it or any of
its property is bound;
(b) result in the creation or imposition of any Lien upon any of the
Seller's properties pursuant to the terms of any such indenture, agreement or
other instrument (other than any Lien that may be granted under the Basic
Documents or any Lien created pursuant to Section 39.309 of the Securitization
Law); or
(c) violate any existing law or any existing order, rule or regulation
applicable to the Seller of any Governmental Authority having jurisdiction over
the Seller or its properties.
SECTION 3.06 No Proceedings. There are no proceedings pending and, to
the Seller's knowledge, there are no proceedings threatened and, to the Seller's
knowledge, there are no investigations pending or threatened, before any
Governmental Authority having jurisdiction over the Seller or its properties
involving or relating to the Seller or the Issuer or, to the Seller's knowledge,
any other Person:
(a) asserting the invalidity of the Securitization Law, the Financing
Order, this Agreement, any of the other Basic Documents or the Series 2003-1
Bonds;
(b) seeking to prevent the issuance of the Series 2003-1 Bonds or the
consummation of any of the transactions contemplated by this Agreement or any of
the other Basic Documents;
(c) seeking a determination or ruling that could reasonably be expected
to materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of the Securitization Law,
the Financing Order, this Agreement, any of the other Basic Documents or the
Series 2003-1 Bonds; or
(d) seeking to adversely affect the federal income tax or state income
or franchise tax classification of the Series 2003-1 Bonds as debt.
SECTION 3.07 Approvals. No approval, authorization, consent, order or
other action of, or filing with, any Governmental Authority is required in
connection with the execution and delivery by the Seller of this Agreement, the
performance by the Seller of the transactions contemplated hereby or the
fulfillment by the Seller of the terms hereof, except those that have been
obtained or made and those that the Seller, in its capacity as Servicer under
the Servicing Agreement, is required to make in the future pursuant to the
Servicing Agreement, including, but not limited to the filing of financing
statements and continuation statements under the UCC and the requisite notices
required to be filed with the Secretary of State of the State of Texas in
accordance with the Financing Order and the Securitization Law.
SECTION 3.08 The Series 2003-1 Transition Property.
(a) Information. Subject to subsection (f) below, at the Closing Date,
all written information, as amended or supplemented from time to time, provided
by the Seller to the Issuer with respect to the Series 2003-1 Transition
Property (including the Expected Amortization Schedule for the Series 2003-1
Bonds, the Financing Order and the Series ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇ Advice Letter) is true
and correct in all material respects.
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(b) Title. It is the intention of the parties hereto that (other than
for United States federal income tax purposes and, to the extent consistent with
applicable state tax law, state income and franchise tax purposes) the transfers
and assignments herein contemplated each constitute a sale and absolute transfer
of the Series 2003-1 Transition Property from the Seller to the Issuer and that
no interest in, or right or title to, the Series 2003-1 Transition Property
shall be part of the Seller's estate in the event of the filing of a bankruptcy
petition by or against the Seller under any bankruptcy law. No portion of the
Series 2003-1 Transition Property has been sold, transferred, assigned or
pledged or otherwise conveyed by the Seller to any Person other than the Issuer,
and no security agreement, financing statement or equivalent security or lien
instrument listing the Seller as debtor covering all or any part of the Series
2003-1 Transition Property is on file or of record in any jurisdiction, except
such as may have been filed, recorded or made in favor of the Issuer or the
Indenture Trustee in connection with the Basic Documents. The Seller has not
authorized the filing of and is not aware (after due inquiry) of any financing
statement with the Seller as the debtor that includes a description of
collateral including the Series 2003-1 Transition Property other than any
financing statement filed, recorded or made in favor of the Issuer or the
Indenture Trustee in connection with the Basic Documents. The Seller is not
aware (after due inquiry) of any judgment or tax lien filings against either the
Seller or the Issuer that could affect the Series 2003-1 Transition Property. On
the Closing Date, immediately prior to the sale of the Series 2003-1 Transition
Property hereunder, the Seller owns the rights and interests under the Financing
Order free and clear of all Liens and rights of any other Person, and no
offsets, defenses or counterclaims exist or have been asserted with respect
thereto.
(c) Transfer Filings. On the Closing Date, immediately upon the sale
hereunder, the Series 2003-1 Transition Property shall be validly transferred
and sold to the Issuer, the Issuer shall own all such Transferred Transition
Property free and clear of all Liens (except for any Lien created in favor of
the Holders pursuant to Section 39.309 of the Securitization Law or any Lien
that may be granted under the Basic Documents) and all filings to be made by the
Seller (including filings with the Secretary of State of the State of Texas
under the Securitization Law) necessary in any jurisdiction to give the Issuer a
perfected ownership interest (subject to any Lien created in favor of the Series
2003-1 Holders pursuant to Section 39.309 of the Securitization Law and any Lien
that may be granted under the Basic Documents) in the Series 2003-1 Transition
Property have been made. No further action is required to maintain such
ownership interest (subject to any Lien created in favor of the Series 2003-1
Holders pursuant to Section 39.309 of the Securitization Law and any Lien that
may be granted under the Basic Documents) and to give the Indenture Trustee a
first priority perfected security interest in the Series 2003-1 Transition
Property. Filings have also been made to perfect the security interest in the
Series 2003-1 Transition Property granted by the Seller to the Issuer (subject
to any Lien created in favor of the Series 2003-1 Holders pursuant to Section
39.309 of the Securitization Law and any Lien that may be granted under the
Basic Documents) and, to the extent necessary, the Indenture Trustee pursuant to
Section 2.01.
(d) Financing Order, Series 2003-1 Issuance Advice Letter and Tariff;
Other Approvals. On the Closing Date, under the laws of the State of Texas
(including the Securitization Law) and the United States in effect on the
Closing Date, (i) the Financing Order pursuant to which the rights and interests
of the Seller have been created, including the right to impose, collect and
receive the Series 2003-1 Transition Charge, and the interest in, to and under
the Series 2003-1 Transition Property transferred on such date, is Final and
non-appealable and is in full force and effect; (ii) as of the issuance of the
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Series 2003-1 Bonds, the Series 2003-1 Bonds are entitled to the protection of
the Securitization Law and, accordingly, the Financing Order, the Series 2003-1
Transition Charges and the Series ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇ Advice Letter are not
revocable by the PUCT; [(iii) the related Tariff is in full force and effect and
is not subject to modification by the PUCT except as provided under Section
39.307 of the Securitization Law;] (iv) the process by which the Financing Order
creating the Series 2003-1 Transition Property was adopted and approved, and
such Financing Order, Series 2003-1 Issuance Advice Letter and the related
Tariff themselves, comply with all applicable laws, rules and regulations; (v)
the Series ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇ Advice Letter and the related Tariff relating to the
Series 2003-1 Transition Property have been filed in accordance with the
Financing Order creating the Series 2003-1 Transition Property and an officer of
the Seller has provided the certification to the PUCT required by the Series
▇▇▇▇-▇ ▇▇▇▇▇▇▇▇ Advice Letter; and (vi) no other approval, authorization,
consent, order or other action of, or filing with any Governmental Authority is
required in connection with the creation of the Series 2003-1 Transition
Property, except those that have been obtained or made.
(e) State Action. Under the Securitization Law, the State of Texas
(including the PUCT) has pledged that it will not take or permit any action that
would impair the value of the Series 2003-1 Transition Property, or, except as
permitted by Section 39.307 of the Securitization Law, reduce, alter or impair
the Series 2003-1 Transition Charges relating to the Series 2003-1 Transition
Property until the principal, interest and premium and any other charges
incurred and contracts to be performed in connection with the Series 2003-1
Bonds relating to the Series 2003-1 Transition Property have been paid and
performed in full. Under the laws of the State of Texas and the United States,
Holders of the Series 2003-1 Bonds could successfully challenge under the
Federal Contract Clause and the Texas Contract Clause the constitutionality of
any legislation passed by the State of Texas, including the PUCT, which becomes
law that repeals or amends the Securitization Law in such a manner that
substantially impairs the value of the rights of the Holders of the Series
2003-1 Bonds or the Series 2003-1 Transition Charges prior to the time that the
Series 2003-1 Bonds are fully paid and discharged, unless it were determined
that such repeal or amendment was a legitimate and reasonable exercise of the
State of Texas's sovereign powers and reasonable and necessary to serve a
significant and legitimate public purpose. A court would conclude that adverse
action by the Texas Legislature or the PUCT that repeals the State of Texas'
pledge to the Series 2003-1 Bondholders or otherwise adversely affects the
Series 2003-1 Transition Property would constitute a compensable taking under
the Takings Clauses of the United States and Texas Constitutions, if the court
determines that such action is an intentional action by the Texas Legislature or
the PUCT, effects a regulatory taking of the Series 2003-1 Transition Property
and is for public use. There is no assurance, however, that, even if a court
were to award just compensation it would be sufficient to pay the full amount of
principal and interest on the Series 2003-1 Bonds.
(f) Assumptions. Based upon the information available to the Seller on
the Closing Date, the assumptions used in calculating the Series 2003-1
Transition Charges are reasonable and made in good faith. Notwithstanding the
foregoing, the Seller makes no representation or warranty, express or implied,
that the assumptions used in calculating the Series 2003-1 Transition Charges
will in fact be realized.
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(g) Creation of the Series 2003-1 Transition Property. Upon the
effectiveness of the Financing Order, the Series ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇ Advice Letter
and the Tariff with respect to the Series 2003-1 Transition Property and the
transfer of the Series 2003-1 Transition Property pursuant to this Agreement:
(i) the rights and interests of the Seller under the Financing
Order, including the right to impose, collect and receive the Series 2003-1
Transition Charges authorized in the Financing Order, will become Transition
Property;
(ii) the Series 2003-1 Transition Property will constitute a
present property right vested in the Issuer;
(iii) the Series 2003-1 Transition Property will include (A) the
right, title and interest of the Seller in, to and under the Financing Order and
the Series 2003-1 Transition Charges and (B) the right to obtain periodic
adjustments (with respect to adjustments, in the manner and with the effect
provided in Section 4.01(b) of the Servicing Agreement) of the Series 2003-1
Transition Charges;
(iv) the owner of the Series 2003-1 Transition Property will be
legally entitled to ▇▇▇▇ Series 2003-1 Transition Charges and collect payments
in respect of the Series 2003-1 Transition Charges in the aggregate sufficient
to pay the interest on and principal of the Series 2003-1 Bonds in accordance
with the Indenture, to pay the Indenture Trustee's and the Independent Managers'
fees and other charges and the fees and expenses of servicing the Series 2003-1
Bonds, to replenish the Series 2003-1 Capital Subaccount to the respective
Required Capital Level and to fund the Series 2003-1 Overcollateralization
Subaccount to the respective Required Overcollateralization Level until the
Series 2003-1 Bonds are paid in full or until the last date permitted for the
collection of payments in respect of the Series 2003-1 Transition Charge under
the Financing Order, whichever is earlier and the Customer class allocation
percentages in the Financing Order do not prohibit the owner of the Series
2003-1 Transition Property from obtaining adjustments and effecting allocations
to the Series 2003-1 Transition Charges in order to collect payments of such
amounts; and
(v) the Series 2003-1 Transition Property is not subject to any
Lien other than the lien created by the Indenture.
(h) Nature of Representations and Warranties. The representations and
warranties set forth in this Section 3.08, insofar as they involve conclusions
of law, are made not on the basis that the Seller 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 Series 2003-1
Holders are purchasing the Series 2003-1 Bonds, and to reflect the parties'
agreement that, if such understanding turns out to be incorrect or inaccurate,
the Seller will be obligated to indemnify the Issuer and its permitted assigns
(to the extent required by and in accordance with Section 5.01), and that the
Issuer and its permitted assigns and the Indenture Trustee (for itself and for
the benefit of the Series 2003-1 Holders) will be entitled to enforce any rights
and remedies under the Basic Documents, on account of such inaccuracy to the
same extent as if the Seller had breached any other representations or
warranties hereunder.
9
(i) Prospectus. As of the date hereof, the information describing the
Seller under the caption "The Seller and Servicer" in the prospectus dated
_______________, 2003 (the "Prospectus") relating to the Bonds is correct in all
material respects.
(j) Solvency. After giving effect to the sale of the Series 2003-1
Transition Property hereunder, the Seller:
(i) is solvent and expects to remain solvent;
(ii) is adequately capitalized to conduct its business and affairs
considering its size and the nature of its business and
intended purpose;
(iii) is not engaged in nor does it expect to engage in a business
for which its remaining property represents an unreasonably small portion of its
capital;
(iv) reasonably believes that it will be able to pay its debts as
they come due; and
(v) is able to pay its debts as they mature and does not intend
to incur, or believes that it will not incur, indebtedness that it will not be
able to repay at its maturity.
(k) No Court Order. There is no order by any court providing for the
revocation, alteration, limitation or other impairment of the Securitization
Law, the Financing Order, the Series 2003-1 Issuance Advice Letter, the Series
2003-1 Transition Property or the Series 2003-1 Transition Charges or any rights
arising under any of them or that seeks to enjoin the performance of any
obligations under the Financing Order.
(l) Conversion to a Limited Liability Company. In the event the Seller
converts into a Texas limited liability company, such conversion will not:
(i) interrupt the Seller's existence,
(ii) affect the Seller's rights, title and interests in its real
estate and other property or its power, authority or ability to perform its
obligations under this Agreement, the Servicing Agreement or the other Basic
Documents, or
(iii) impair or diminish the liabilities and obligations of the
Seller including, without limitation, its obligations under this Agreement or
any other Basic Document.
(m) Survival of Representations and Warranties. The representations and
warranties set forth in this Section 3.08 shall survive the execution and
delivery of this Agreement and may not be waived by any party hereto except
pursuant to a written agreement executed in accordance with Article III and as
to which the Rating Agency Condition has been satisfied.
SECTION 3.09 Limitations on Representations and Warranties. Without
prejudice to any of the other rights of the parties, the Seller will not be in
breach of any representation or warranty, as a result of a change in law by
means of any legislative enactment, constitutional amendment or voter
initiative. THE SELLER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
10
THAT AMOUNTS ACTUALLY COLLECTED ARISING FROM THE Series 2003-1 TRANSITION
CHARGES WILL IN FACT BE SUFFICIENT TO MEET PAYMENT OBLIGATIONS ON THE Series
2003-1 BONDS OR THAT THE ASSUMPTIONS MADE IN CALCULATING THE Series 2003-1
TRANSITION CHARGES WILL IN FACT BE REALIZED.
ARTICLE IV.
COVENANTS OF THE SELLER
SECTION 4.01 Existence. Subject to Section 5.02, so long as any of
the Series 2003-1 Bonds are Outstanding, the Seller (a) will keep in full force
and effect its existence and remain in good standing under the laws of the
jurisdiction of its organization, (b) will obtain and preserve its qualification
to do business, in each case to the extent that in each such jurisdiction such
existence or qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the other Basic Documents to which the Seller
is a party and each other instrument or agreement necessary or appropriate to
the proper administration of this Agreement and the transactions contemplated
hereby or to the extent necessary for the Seller to perform its obligations
hereunder or thereunder and (c) it or another entity will provide electric
transmission or distribution service to retail customers located within TXU
Electric Company's certificated service area as it existed on May 1, 1999.
SECTION 4.02 No Liens. Except for the conveyances hereunder or any Lien
under Section 39.309 of the Securitization Law for the benefit of the Issuer,
the Indenture Trustee or the Series 2003-1 Holders, the Seller will not sell,
pledge, assign or transfer, or grant, create, incur, assume or suffer to exist
any Lien on, any of the Series 2003-1 Transition Property, or any interest
therein, and the Seller shall defend the right, title and interest of the Issuer
and the Indenture Trustee, on behalf of the Series 2003-1 Holders, in, to and
under the Series 2003-1 Transition Property against all claims of third parties
claiming through or under the Seller. The Seller will not at any time assert any
Lien against, or with respect to, any of the Series 2003-1 Transition Property.
SECTION 4.03 Delivery of Collections. In the event that the Seller
receives Collections in respect of the Series 2003-1 Transition Charges or the
proceeds thereof other than in its capacity as Servicer, the Seller shall pay to
the Servicer all payments received by it in respect thereof as soon as
practicable after receipt thereof and for so long as any Intercreditor Agreement
is in effect, it shall do so in accordance with such Intercreditor Agreement.
Prior to such remittance to the Servicer by the Seller, the Seller agrees that
such amounts are held by it in trust for the Issuer. If the Seller becomes a
party to any future trade receivables purchase and sale arrangement or similar
arrangement under which it sells all or any portion of its accounts receivable,
the Seller and the other parties to such arrangement shall enter into an
agreement substantially similar to the Intercreditor Agreement in connection
therewith and the terms of the documentation evidencing such trade receivables
purchase and sale arrangement or similar arrangement shall expressly exclude the
Series 2003-1 Transition Charges from any receivables or other assets pledged or
sold under such arrangement.
SECTION 4.04 Notice of Liens. The Seller shall notify the Issuer and the
Indenture Trustee promptly after becoming aware of any Lien on any of the Series
2003-1 Transition Property, other than the conveyances hereunder, any Lien under
11
the Basic Documents or any Lien under Section 39.309 of the Securitization Law
for the benefit of the Issuer or the Series 2003-1 Holders.
SECTION 4.05 Compliance with Law. The Seller shall comply with its
organizational or governing documents and all laws, treaties, rules, regulations
and determinations of any Governmental Authority applicable to it, except to the
extent that failure to so comply would not materially adversely affect the
Issuer's or the Indenture Trustee's interests in the Series 2003-1 Transition
Property or under any of the other Basic Documents to which the Seller is party
or the Seller's performance of its obligations hereunder or under any of the
other Basic Documents to which it is party.
SECTION 4.06 Covenants Related to Bonds and the Series 2003-1 Transition
Property.
(a) So long as any of the Series 2003-1 Bonds are outstanding, the
Seller shall treat the Series 2003-1 Bonds as debt for all purposes and
specifically as debt of the Issuer, except for financial reporting or tax
purposes or as required under the Public Utility Holding Company Act of 1935, as
amended.
(b) Solely for the purposes of federal tax law and, to the extent
consistent with applicable state, local and other tax law, for purposes of
state, local and other tax law, so long as any of the Series 2003-1 Bonds are
outstanding, the Seller agrees to treat the Series 2003-1 Bonds as indebtedness
of the Seller (as the sole owner of the Issuer) secured by the Series 2003-1
Collateral unless otherwise required by appropriate taxing authorities.
(c) So long as any of the Series 2003-1 Bonds are outstanding, the
Seller shall disclose in its financial statements that the Issuer, and not the
Seller, is the owner of the Series 2003-1 Transition Property and that the
assets of the Issuer are not available to pay creditors of the Seller or its
Affiliates (other than the Issuer).
(d) So long as any of the Series 2003-1 Bonds are outstanding, the
Seller shall not own or purchase any Bonds.
(e) So long as the Series 2003-1 Bonds are outstanding, the Seller shall
disclose the effects of all transactions between the Seller and the Issuer in
accordance with generally accepted accounting principles.
(f) The Seller agrees that, upon the sale by the Seller of the Series
2003-1 Transition Property to the Issuer pursuant to this Agreement, (i) to the
fullest extent permitted by law, including applicable PUCT Regulations and the
Securitization Law, the Issuer shall have all of the rights originally held by
the Seller with respect to the Series 2003-1 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 REP in
respect of the Series 2003-1 Transition Property, notwithstanding any objection
or direction to the contrary by the Seller (and the Seller agrees not to make
any such objection or to take any such contrary action) and (ii) any payment by
any Customer or REP to the Servicer shall discharge such Customer's or REP's
obligations, if any, to the Seller in respect of the Series 2003-1 Transition
12
Property to the extent of such payment, notwithstanding any objection or
direction to the contrary by the Seller.
(g) So long as any of the Series 2003-1 Bonds are Outstanding, (i) in
all proceedings relating directly or indirectly to the Series 2003-1 Transition
Property, the Seller shall affirmatively certify and confirm that it has sold
all of its rights and interests in, to and under such property (other than for
financial reporting or tax purposes), (ii) the Seller shall not make any
statement or reference in respect of the Series 2003-1 Transition Property that
is inconsistent with the ownership interest of the Issuer (other than for
financial reporting or tax purposes or as required under the Public Utility
Holding Company Act of 1935, as amended), (iii) the Seller shall not take any
action in respect of the Series 2003-1 Transition Property except solely in its
capacity as the Servicer thereof pursuant to the Servicing Agreement or as
otherwise contemplated by the Basic Documents including any Intercreditor
Agreement, (iv) the Seller shall not sell transition property under any
financing order in connection with the issuance of additional transition bonds
unless the Rating Agency Condition shall have been satisfied with respect to the
Series 2003-1 Bonds, and (v) neither the Seller nor the Issuer shall take any
action, file any tax return, or make any election inconsistent with the
treatment of the Issuer, for purposes of federal income taxes and, to the extent
consistent with applicable state, local and other tax law, for purposes of
state, local and other taxes, as a disregarded entity that is not separate from
the Seller (or, if relevant, from another sole owner of the Issuer).
SECTION 4.07 Protection of Title. The Seller shall execute and file
such filings, including filings with the Secretary of State of the State of
Texas pursuant to the Securitization Law, and cause to be executed and filed
such filings, all in such manner and in such places as may be required by law to
fully preserve, maintain and protect the ownership interest of the Issuer in the
Series 2003-1 Transition Property, including all filings required under the
Securitization Law relating to the transfer of the ownership interest in the
Series 2003-1 Transition Property by the Seller to the Issuer or the pledge of
the Issuer's interest in such Series 2003-1 Transition Property to the Indenture
Trustee. The Seller shall deliver or cause to be delivered to the Issuer
file-stamped copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing. The Seller shall institute
any action or proceeding reasonably necessary to compel performance by the PUCT,
the State of Texas or any of their respective agents, of any of their
obligations or duties under the Securitization Law as it pertains to the Series
2003-1 Bonds, the Financing Order or the Series ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇ Advice Letter,
and the Seller 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
(i) to protect the Issuer and the Series 2003-1 Holders from claims, state
actions or other actions or proceedings of third parties which, if successfully
pursued, would result in a breach of any representation set forth in Article III
and (ii) to block or overturn any attempts to cause a repeal of, modification of
or supplement to the Securitization Law as it pertains to the Series 2003-1
Bonds, the Financing Order, the Series ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇ Advice Letter or the
rights of Series 2003-1 Bondholders by legislative enactment or constitutional
amendment that would be materially adverse to the Issuer, the Indenture Trustee
or the Series 2003-1 Bondholders or which would otherwise cause a material
impairment of the rights of the Issuer or the Series 2003-1 Holders. The costs
of any such actions or proceedings will be payable by the Seller.
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SECTION 4.08 Nonpetition Covenants. Notwithstanding any prior
termination of this Agreement or the Indenture, the Seller shall not, prior to
the date which is one year and one day after the termination of the Indenture,
petition or otherwise invoke or cause the Issuer to invoke the process of any
court or Government Authority for the purpose of commencing or sustaining a case
against the Issuer under any federal or state bankruptcy, insolvency or similar
law, appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or any substantial part of
the property of the Issuer, or ordering the winding up or liquidation of the
affairs of the Issuer.
SECTION 4.09 Taxes. So long as any of the Bonds are outstanding, the
Seller 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 Series
2003-1 Transition Property; provided that no such tax need be paid if the Seller
or one of its subsidiaries is contesting the same in good faith by appropriate
proceedings promptly instituted and diligently conducted and if the Seller or
such subsidiary has established appropriate reserves as shall be required in
conformity with generally accepted accounting principles.
SECTION 4.10 The Series ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇ Advice Letter. The Seller shall
not withdraw the filing of the Series ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇ Advice Letter with the
PUCT.
SECTION 4.11 Tariff. The Seller shall make all reasonable efforts to
keep each Tariff in full force and effect at all times.
SECTION 4.12 Maintenance of Operations. Subject to Section 5.02, so long
as any of the Series 2003-1 Bonds are outstanding, the Seller shall continue to
operate its electric transmission and distribution system to have it or another
entity provide or cause another entity to provide electric transmission or
distribution service to retail customers (or, if transmission and distribution
are split, to provide electric transmission or distribution service directly to
retail customers) located within TXU Electric Company's certificated service
area as it existed as of May 1, 1999, [except for former customers not taking
service from the Seller pursuant to PUCT Docket No. _______ and,] except as
provided under PURA Sections 39.252(b) and 39.262(k), as implemented by P.U.C.
SUBST. R. 25.345.
SECTION 4.13 Notice of Breach to Rating Agencies, Etc. Promptly after
obtaining knowledge thereof, in the event of a breach in any material respect
(without regard to any materiality qualifier contained in such representation,
warranty or covenant) of any of the Seller's representations, warranties or
covenants contained herein, the Seller shall promptly notify the Issuer, the
Indenture Trustee, the PUCT and the Rating Agencies of such breach. For the
avoidance of doubt, any breach which would adversely affect scheduled payments
on the Bonds will be deemed to be a material breach for purposes of this Section
4.13.
SECTION 4.14 Use of Proceeds. The Seller shall use the proceeds of the
sale of the Series 2003-1 Transition Property in accordance with the Financing
Order and the Securitization Law.
14
SECTION 4.15 Further Assurances. Upon the request of the Issuer, the
Seller shall execute and deliver such further instruments and do such further
acts as may be reasonably necessary to carry out more effectively the provisions
and purposes of this Agreement.
ARTICLE V.
THE SELLER
SECTION 5.01 Liability of Seller; Indemnities.
(a) The Seller shall be liable in accordance herewith only to the extent
of the obligations specifically undertaken by the Seller under this Agreement.
(b) The Seller shall indemnify the Issuer, the Indenture Trustee (for
itself and for the benefit of the Series 2003-1 Bondholders) and each of their
respective officers, trustees, managers and agents for, and defend and hold
harmless each such Person from and against, any and all taxes (other than taxes
imposed on the Series 2003-1 Bondholders as a result of their ownership of a
Series 2003-1 Bond) that may at any time be imposed on or asserted against any
such Person as a result of and incidental to the sale of the Series 2003-1
Transition Property to the Issuer, including any franchise, sales, gross
receipts, general corporation, tangible personal property, privilege or license
taxes but excluding any taxes imposed as a result of a failure of such Person to
withhold or remit taxes with respect to payments on any Series 2003-1 Bond, it
being understood that the Series 2003-1 Bondholders shall be entitled to enforce
their rights against the Seller under this Section 5.01(b) solely through a
cause of action brought for their benefit by the Indenture Trustee in accordance
with the terms of the Indenture.
(c) The Seller shall indemnify the Issuer, the Indenture Trustee (for
itself and for the benefit of the Series 2003-1 Bondholders) and each of their
respective officers, directors, employees, trustees, managers, and agents for,
and defend and hold harmless each such Person from and against, any and all
taxes (other than taxes imposed on Series 2003-1 Bondholders as a result of
their ownership of a Series 2003-1 Bond) that may at any time be imposed on or
asserted against any such Person as a result of and incidental to the Issuer's
acquisition or holding of the Series 2003-1 Transition Property, the issuance
and sale by the Issuer of the Series 2003-1 Bonds or the other transactions
contemplated in the Basic Documents, including any franchise, sales, gross
receipts, general corporation, tangible personal property, privilege or license
taxes but excluding any taxes imposed as a result of a failure of such Person to
withhold or remit taxes with respect to payments on any Series 2003-1 Bond.
(d) The Seller shall indemnify the Issuer, the Indenture Trustee (for
the benefit of the Series 2003-1 Bondholders) and each of their respective
officers, directors, employees and agents and any Swap Counterparty for, and
defend and hold harmless each such Person from and against, any and all
liabilities, obligations, losses, claims, damages, payments, costs or expenses
of any kind whatsoever (collectively, "Losses") that may be imposed on, incurred
by or asserted against each such Person, in each such case, as a result of the
Seller's breach of any of its representations, warranties or covenants contained
in this Agreement.
15
(e) Indemnification under Sections 5.01(b), 5.01(c), 5.01(d) and 5.01(g)
shall include reasonable out-of-pocket fees and expenses of investigation and
litigation (including reasonable attorney's fees and expenses), except as
otherwise expressly provided in this Agreement.
(f) Without prejudice to any of the other rights of the parties, the
Seller will not be in breach of any representation or warranty as a result of a
change in law by means of any legislative enactment, constitutional amendment or
voter initiative.
(g) The Seller shall indemnify the Indenture Trustee (for itself) and
any of its respective affiliates, officers, directors and agents (each an
"Indemnified Person") for, and defend and hold harmless each such Person from
and against, any and all Losses incurred by any of such Indemnified Persons as a
result of the Seller's breach of any of its representations and warranties or
covenants contained in this Agreement, except to the extent of Losses either
resulting from the willful misconduct, bad faith or gross negligence of such
Indemnified Person or resulting from a breach of a representation or warranty
made by such Indemnified Person in any of the Basic Documents that gives rise to
the Seller's breach. The Seller shall not be required to indemnify an
Indemnified Person for any amount paid or payable by such Indemnified Person in
the settlement of any action, proceeding or investigation without the prior
written consent of the Seller which consent shall not be unreasonably withheld
or delayed. Promptly after receipt by an Indemnified Person of notice of the
commencement of any action, proceeding or investigation, such Indemnified Person
shall, if a claim in respect thereof is to be made against the Seller under this
Section 5.01(g), notify the Seller in writing of the commencement thereof.
Failure by an Indemnified Person to so notify the Seller shall relieve the
Seller from the obligation to indemnify and hold harmless such Indemnified
Person under this Section 5.01(g) only to the extent that the Seller suffers
actual prejudice as a result of such failure. With respect to any action,
proceeding or investigation brought by a third party for which indemnification
may be sought under this Section 5.01(g), the Seller shall be entitled to
conduct and control, at its expense and with counsel of its choosing that is
reasonably satisfactory to such Indemnified Person, the defense of any such
action, proceeding or investigation (in which case the Seller shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the Indemnified Person except as set forth below); provided that the
Indemnified Person shall have the right to participate in such action,
proceeding or investigation through counsel chosen by it and at its own expense.
Notwithstanding the Seller's election to assume the defense of any action,
proceeding or investigation, the Indemnified Person shall have the right to
employ separate counsel (including local counsel), and the Seller shall bear the
reasonable fees, costs and expenses of such separate counsel if (i) the
defendants in any such action include both the Indemnified Person and the Seller
and the Indemnified Person shall have reasonably concluded that there may be a
conflict of interest between such Indemnified Person and the Seller making it
undesirable for the same counsel to represent both parties, (ii) the Seller
shall not have employed counsel reasonably satisfactory to the Indemnified
Person to represent the Indemnified Person within a reasonable time after notice
of the institution of such action or (iii) the Seller shall authorize the
Indemnified Person to employ separate counsel at the expense of the Seller.
Notwithstanding the foregoing, the Seller shall not be obligated to pay for the
fees, costs and expenses of more than one separate counsel for the Indemnified
Persons other than one local counsel, if appropriate.
16
(h) The Seller shall indemnify the Servicer (if the Servicer is not the
Seller) for the costs of any action instituted by the Servicer in connection
with the Series 2003-1 Transition Property pursuant to Section 5.02(d) of the
Servicing Agreement which are not paid as Operating Expenses in accordance with
the priorities set forth in Section 8.02(e) of the Indenture.
(i) The remedies provided in this Agreement are the sole and exclusive
remedies against the Seller for breach of its representations and warranties in
this Agreement.
(j) Indemnification under this Section 5.01 shall survive any repeal of,
modification of, or supplement to, or judicial invalidation of, the
Securitization Law or any Financing Order and shall survive the resignation or
removal of the Indenture Trustee or the termination of this Agreement.
SECTION 5.02 Merger, Conversion or Consolidation of, or Assumption of
the Obligations of, Seller. Any Person
(a) into which the Seller may be merged, converted or consolidated and
which is a Permitted Successor,
(b) that may result from any merger, conversion or consolidation to
which the Seller shall be a party and which is a Permitted Successor,
(c) that may succeed to the properties and assets of the Seller
substantially as a whole and which is a Permitted Successor,
(d) which is a successor entity resulting from the division of the
Seller into two or more Persons and which is a Permitted Successor, or
(e) which otherwise succeeds to all or substantially all of the electric
transmission and distribution business of the Seller (or, if transmission and
distribution are not provided by a single entity, which provides electric
transmission or distribution service to retail customers located within TXU
Electric Company's certificated service area as it existed on May 1, 1999) (a
"Permitted Successor"), and which Person in any of the foregoing cases executes
an agreement of assumption to perform all of the obligations of the Seller
hereunder (including the Seller's obligations under Section 5.01 incurred at any
time prior to or after the date of such assumption), shall be the successor to
the Seller 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 (if made as of such date) shall be 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 Seller shall
have delivered to the Issuer, the Indenture Trustee and each Rating Agency an
Officer's Certificate and an Opinion of Counsel from external counsel stating
that such consolidation, merger, division or succession and such agreement of
assumption comply with this Section 5.02 and that all conditions precedent, if
any, provided for in this Agreement relating to such transaction have been
complied with, (iii) the Seller shall have delivered to the Issuer, the
Indenture Trustee and each Rating Agency an Opinion of Counsel from external
counsel either (A) stating that, in the
17
opinion of such counsel, all filings to be made by the Seller, including filings
with the PUCT pursuant to the Securitization Law, have been executed and filed
that are necessary to fully preserve and protect the interest of the Issuer in
all of the Series 2003-1 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 and (iv) the Seller
shall have given the Rating Agencies prior written notice of such transaction.
When any Person (or more than one Person) acquires the properties and assets of
the Seller substantially as a whole or otherwise becomes the successor, whether
by merger, conversion, consolidation, sale, transfer, lease, management contract
or otherwise, to all or substantially all of the electric transmission and
distribution business of the Seller (or, if transmission and distribution are
not provided by a single entity, provides electric transmission or distribution
service to customers located in TXU Electric Company's certificated service area
as it existed on May 1, 1999) in accordance with the terms of this Section 5.02,
then upon satisfaction of all of the other conditions of this Section 5.02, the
preceding Seller shall automatically and without further notice be released from
all of its obligations hereunder.
SECTION 5.03 Conversion of the Seller to a Limited Liability Company.
Notwithstanding anything in this Agreement to the contrary, the Seller shall be
able to convert to a limited liability company without the execution of an
agreement of assumption and without compliance with clauses (i), (ii), (iii) and
(iv) of Section 5.02, provided that such conversion does not result in a breach
of the Seller's representation and warranty in Section 3.08(m) hereof.
SECTION 5.04 Limitation on Liability of Seller and Others. The Seller
and any director, officer, employee or agent of the Seller 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 Section 4.07, the Seller shall not be under any obligation
to appear in, prosecute or defend any legal action that is not 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. This Agreement may be amended in writing by the
Seller and the Issuer, with the prior written consent of the Indenture Trustee,
the satisfaction of the Rating Agency Condition and the satisfaction of the
condition set forth below in Section 6.02. Promptly after the execution of any
such amendment or consent, the Issuer shall furnish written notification of the
substance of such amendment or consent to each of the Rating Agencies.
Prior to the execution of any amendment to this Agreement, the Issuer
and the Indenture Trustee shall be entitled to receive and conclusively rely
upon an Opinion of Counsel from external counsel stating that the execution of
such amendment is authorized or permitted by this Agreement and the Opinion of
Counsel referred to in Section 3.01(c)(i) of the Servicing Agreement. The Issuer
and the Indenture Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Indenture Trustee's own rights, duties or
immunities under this Agreement or otherwise.
18
SECTION 6.02 PUCT Condition. Notwithstanding anything to the contrary in
Section 6.01, no amendment or modification of this Agreement shall be effective
except upon satisfaction of the conditions precedent in this Section 6.02.
(a) At least fifteen days prior to the effectiveness of any such
amendment or modification and after obtaining the other necessary approvals set
forth in Section 6.01 above (except that the consent of the Indenture Trustee
may be subject to the consent of the Holders if such consent is required or
sought by the Indenture Trustee in connection with such amendment or
modification pursuant to the terms of the Indenture), the Seller shall have
delivered to the PUCT's executive director and general counsel written
notification of any proposed amendment, which notification shall contain:
(i) a reference to Docket No. 25230;
(ii) an Officer's Certificate stating that the proposed amendment
or modification has been approved by all parties to this Agreement; and
(iii) a statement identifying the person to whom the PUCT or its
staff is to address any response to the proposed amendment or to request
additional time.
(b) If the PUCT or its staff shall have, within fifteen days (subject to
extension as provided in Section 6.02(c) below) of receiving a notification
complying with Section 6.02(a) above, delivered to the office of the person
specified in Section 6.02(a)(iii) above a written statement that the PUCT might
object to the proposed amendment or modification, then such proposed amendment
or modification shall not be effective unless and until the PUCT subsequently
delivers a written statement in writing that it does not object to such proposed
amendment or modification.
(c) If the PUCT or its staff shall have, within fifteen days of
receiving a notification complying with Section 6.02(a) above, delivered to the
office of the person specified in Section 6.02(a)(iii) above a written statement
requesting an additional amount of time not to exceed thirty days in which to
consider such proposed amendment or modification, then such proposed amendment
or modification shall not be effective if, within such extended period, the PUCT
shall have delivered to the office of the person specified in Section
6.02(a)(iii) above a written statement as described in Section 6.02(b) above,
unless and until the PUCT subsequently delivers a written statement in writing
that it does not object to such proposed amendment or modification.
(d) If the PUCT or its staff shall have not delivered written notice
that the PUCT might object to such proposed amendment or modification within the
time periods described in Section 6.02(b) or Section 6.02(c) above, whichever is
applicable, then the PUCT shall be conclusively deemed not to have any objection
to the proposed amendment or modification and such amendment or modification may
subsequently become effective upon satisfaction of the other conditions
specified in Section 6.01.
(e) Following the delivery of a notice to the PUCT by the Seller under
Section 6.02(a) above, the Seller and the Issuer shall have the right at any
time to withdraw from the PUCT further consideration of any notification of a
proposed amendment.
19
SECTION 6.03 Notices. All demands, notices and communications upon or to
the Seller, the Issuer, the Indenture Trustee, or the Rating Agencies under this
Agreement shall be sufficiently given for all purposes hereunder if in writing,
and delivered personally, sent by documented delivery service or, to the extent
receipt is confirmed telephonically, sent by telecopy or other form of
electronic transmission,
(a) in the case of the Servicer, to
Oncor Electric Delivery Company
Energy Plaza
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇-▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Assistant Treasurer
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
(b) in the case of the Issuer to
Oncor Electric Delivery Transition Bond Company LLC
Energy Plaza
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇-▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Manager
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
(c) in the case of the Indenture Trustee, to it at the
The Bank of New York
Corporate Trust ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Asset Backed Securities
telephone: (▇▇▇) ▇▇▇-▇▇▇▇
facsimile: (▇▇▇) ▇▇▇-▇▇▇▇,
(d) in the case of the PUCT, to
Public Utility Commission of Texas
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention of Executive Director, Director of Financial Review
Division and General Counsel
telephone: (▇▇▇) ▇▇▇-▇▇▇▇
facsimile: (▇▇▇) ▇▇▇-▇▇▇▇,
20
(e) in the case of Moody's, to
▇▇▇▇▇'▇ Investors Service, Inc.
ABS Monitoring Department
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
telephone: (▇▇▇) ▇▇▇-▇▇▇▇
facsimile: (▇▇▇) ▇▇▇-▇▇▇▇,
(f) in the case of S&P, to
Standard & Poor's
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention of Asset Backed Surveillance Department
telephone: (▇▇▇) ▇▇▇-▇▇▇▇
facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(g) in the case of Fitch, to
Fitch Ratings
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention of ABS Surveillance
telephone: (▇▇▇) ▇▇▇-▇▇▇▇
facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or
(h) as to each of the foregoing, at such other address as shall be
designated by written notice to the other parties.
SECTION 6.04 Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Section 5.02, this Agreement may not be
assigned by the Seller.
SECTION 6.05 Limitations on Rights of Third Parties. The provisions of
this Agreement are solely for the benefit of the Seller, the Issuer, the
Indenture Trustee, (for itself and the Holders) and the other Persons expressly
referred to herein, and such Persons shall have the right to enforce the
relevant provisions of this Agreement. 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 Series 2003-1 Transition Property or
under or in respect of this Agreement or any covenants, conditions or provisions
contained herein.
SECTION 6.06 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remainder of such provision (if any) or the remaining
provisions hereof (unless such construction shall be unreasonable), and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
21
SECTION 6.07 Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 6.08 Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 6.09 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, 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 6.10 Assignment to Indenture Trustee. The Seller hereby
acknowledges and consents to any mortgage, pledge, assignment and grant of a
security interest by the Issuer to the Indenture Trustee pursuant to the
Indenture for the benefit of the Series 2003-1 Holders of all right, title and
interest of the Issuer in, to and under this Agreement and the proceeds thereof
and the assignment of any or all of the Issuer's rights hereunder to the
Indenture Trustee for the benefit of the Series 2003-1 Holders.
SECTION 6.11 Limitation of Liability. It is expressly understood and
agreed by the parties hereto that this Agreement is executed and delivered by
the Indenture Trustee, not individually or personally but solely as Indenture
Trustee on behalf of the Series 2003-1 Holders, in the exercise of the powers
and authority conferred and vested in it.
SECTION 6.12 Waivers. Any term or provision of this Agreement may be
waived, or the time for its performance may be extended, by the party or parties
entitled to the benefit thereof; provided, however, that no such waiver
delivered by the Issuer shall be effective unless the Indenture Trustee has
given its prior written consent thereto. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Agreement if, as to any party,
it is authorized in writing by an authorized representative of such party. The
failure of any party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
any party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
22
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.
ONCOR ELECTRIC DELIVERY TRANSITION BOND
COMPANY LLC,
Issuer
By: _________________________________
Name:____________________________
Title:___________________________
ONCOR ELECTRIC DELIVERY COMPANY,
Seller
By: _________________________________
Name:____________________________
Title:___________________________
Acknowledged and Accepted:
THE BANK OF NEW YORK,
as Indenture Trustee
By: _________________________________
Name:____________________________
Title:___________________________
Signature Page to Series 2003-1 Transition Property Purchase and Sale Agreement
23
EXHIBIT A
FORM OF ▇▇▇▇ OF SALE
1. This ▇▇▇▇ of Sale is being delivered pursuant to the Series 2003-1
Transition Property Purchase and Sale Agreement, dated as of July __, 2003 (the
"Sale Agreement"), between Oncor Electric Delivery Company (the "Seller") and
Oncor Electric Delivery Transition Bond Company LLC (the "Issuer") and is
subject to all of the terms, conditions and limitations contained in the Sale
Agreement. All capitalized terms used but not defined herein have the respective
meanings ascribed thereto in the Sale Agreement.
2. In consideration of the Issuer's delivery to or upon the order of the
Seller of $500,000,000, subject to the satisfaction of the conditions specified
in Section 2.03 of the Sale Agreement, the Seller does hereby irrevocably sell,
transfer, assign, set over and otherwise convey to the Issuer, without recourse
or warranty, except as set forth in the Sale Agreement, all right, title and
interest of the Seller in and to the Series 2003-1 Transition Property
identified on Schedule 1 hereto (such sale, transfer, assignment, setting over
and conveyance of the Series 2003-1 Transition Property includes, to the fullest
extent permitted by the Securitization Law, the right to impose, collect and
receive Series 2003-1 Transition Charges and the assignment of all revenues,
collections, claims, rights, payments, money or proceeds of or arising from the
Series 2003-1 Transition Charges related to the Series 2003-1 Transition
Property, as the same may be adjusted from time to time). Such sale, transfer,
assignment, setting over and conveyance is hereby expressly stated to be a sale
and, pursuant to Section 39.308 of the Securitization Law, shall be treated as
an absolute transfer of all of the Seller's right, title and interest in and to
(as in a true sale), and not as a pledge or other financing of, the Series
2003-1 Transition Property. The Seller and the Issuer agree that after giving
effect to the sale, transfer, assignment, setting over and conveyance
contemplated hereby the Seller has no right, title or interest in or to the
Series 2003-1 Transition Property to which a security interest could attach
because (i) it has sold, transferred, assigned, set over and conveyed all right
in and to the Series 2003-1 Transition Property to the Issuer, (ii) as provided
in Section 39.304 of the Securitization Law, such rights are only contract
rights until the time of such sale, transfer, assignment, setting over and
conveyance and (iii) as provided in Section 39.309(c) of the Securitization Law,
appropriate notice has been filed and such transfer is perfected against all
third parties, including subsequent judicial or other lien creditors. If such
sale, transfer, assignment, setting over and conveyance is held by any court of
competent jurisdiction not to be a true sale as provided in Section 39.308 of
the Securitization Law, then such sale, transfer, assignment, setting over and
conveyance shall be treated as the creation of a security interest (within the
meaning of the Securitization Law and the UCC) in the Series 2003-1 Transition
Property and, without prejudice to its position that it has absolutely
transferred all of its rights in the Series 2003-1 Transition Property to the
Issuer, the Seller hereby grants a security interest in the Series 2003-1
Transition Property to the Issuer (and, to the extent necessary to qualify the
grant as a security interest under the Securitization Law, to the Indenture
Trustee for the benefit of the Series 2003-1 Bondholders issued by the Issuer
and secured by the Series 2003-1 Transition Property).
24
3. Subject to the satisfaction of the conditions specified in Section
2.03 of the Sale Agreement, the Issuer does hereby purchase the Series 2003-1
Transition Property from the Seller for the consideration set forth in paragraph
2 above.
4. The Seller and the Issuer each acknowledge and agree that the
purchase price for the Series 2003-1 Transition Property sold pursuant to this
▇▇▇▇ of Sale and the Sale Agreement is equal to its fair market value at the
time of sale.
5. The Seller confirms that each of the representations and warranties
on the part of the Seller contained in the Sale Agreement are true and correct
in all respects on the date hereof as if made on the date hereof.
6. This ▇▇▇▇ of Sale 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.
7. THIS ▇▇▇▇ OF SALE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF TEXAS, 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 LAW.
IN WITNESS WHEREOF, the Seller and the Issuer have duly executed this
▇▇▇▇ of Sale as of the ___ day of July, 2003.
ONCOR ELECTRIC DELIVERY COMPANY
By:______________________________
Name:
Title:
Oncor Electric Delivery TRANSITION
BOND COMPANY LLC
By:______________________________
as Manager Name:
2
SCHEDULE 1
TO
▇▇▇▇ OF SALE
Series 2003-1 Transition Property