EXHIBIT 10.2
FORM OF TRANSITION PROPERTY SERVICING AGREEMENT
between
CENTERPOINT ENERGY TRANSITION BOND COMPANY II, LLC
Issuer
and
CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC
Servicer
Dated as of [ ]
TABLE OF CONTENTS
ARTICLE I DEFINITIONS.................................................................................. 1
SECTION 1.01. DEFINITIONS........................................................................... 1
SECTION 1.02. OTHER DEFINITIONAL PROVISIONS......................................................... 1
ARTICLE II APPOINTMENT AND AUTHORIZATION OF SERVICER................................................... 2
SECTION 2.01. APPOINTMENT OF THE SERVICER; ACCEPTANCE OF APPOINTMENT................................ 2
SECTION 2.02. AUTHORIZATION......................................................................... 2
SECTION 2.03. DOMINION AND CONTROL OVER TRANSITION PROPERTY......................................... 2
ARTICLE III BILLING SERVICES........................................................................... 3
SECTION 3.01. DUTIES OF THE SERVICER................................................................ 3
SECTION 3.02. COLLECTION AND ALLOCATION OF TRANSITION CHARGES....................................... 5
SECTION 3.03. PAYMENT OF TC COLLECTIONS............................................................. 5
SECTION 3.04. SERVICING AND MAINTENANCE STANDARDS................................................... 6
SECTION 3.05. SERVICER'S CERTIFICATES............................................................... 7
SECTION 3.06. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF DEFAULT.................................. 7
SECTION 3.07. ANNUAL REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM REPORT........................... 7
SECTION 3.08. TRANSITION PROPERTY DOCUMENTATION..................................................... 7
SECTION 3.09. COMPUTER RECORDS; AUDITS OF DOCUMENTATION............................................. 8
SECTION 3.10. DEFENDING TRANSITION PROPERTY AGAINST CLAIMS.......................................... 8
SECTION 3.11. OPINIONS OF COUNSEL................................................................... 9
ARTICLE IV SERVICES RELATED TO TRANSITION CHARGE ADJUSTMENTS AND PBRAF ADJUSTMENTS..................... 10
SECTION 4.01. TRANSITION CHARGE ADJUSTMENTS AND PBRAF ADJUSTMENTS................................... 10
ARTICLE V THE SERVICER................................................................................. 10
SECTION 5.01. REPRESENTATIONS AND WARRANTIES OF THE SERVICER........................................ 10
SECTION 5.02. INDEMNITIES OF THE SERVICER; RELEASE OF CLAIMS........................................ 12
SECTION 5.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, THE SERVICER......... 15
SECTION 5.04. ASSIGNMENT OF THE SERVICER'S OBLIGATIONS.............................................. 16
SECTION 5.05. LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS.................................... 16
SECTION 5.06. CENTERPOINT HOUSTON NOT TO RESIGN AS SERVICER......................................... 17
SECTION 5.07. SERVICING FEE......................................................................... 17
SECTION 5.08. SERVICER EXPENSES..................................................................... 18
SECTION 5.09. APPOINTMENTS.......................................................................... 18
SECTION 5.10. NO SERVICER ADVANCES.................................................................. 19
SECTION 5.11. REMITTANCES........................................................................... 19
SECTION 5.12. PROTECTION OF TITLE................................................................... 19
ARTICLE VI SERVICER DEFAULT............................................................................ 19
SECTION 6.01. SERVICER DEFAULT...................................................................... 19
SECTION 6.02. NOTICE OF SERVICER DEFAULT............................................................ 21
SECTION 6.03. WAIVER OF PAST DEFAULTS............................................................... 21
SECTION 6.04. APPOINTMENT OF SUCCESSOR.............................................................. 21
SECTION 6.05. COOPERATION WITH SUCCESSOR............................................................ 22
ARTICLE VII MISCELLANEOUS PROVISIONS................................................................... 22
SECTION 7.01. AMENDMENT............................................................................. 22
SECTION 7.02. NOTICES............................................................................... 23
SECTION 7.03. ASSIGNMENT............................................................................ 23
SECTION 7.04. LIMITATIONS ON RIGHTS OF OTHERS....................................................... 23
SECTION 7.05. SEVERABILITY.......................................................................... 23
SECTION 7.06. SEPARATE COUNTERPARTS................................................................. 24
SECTION 7.07. HEADINGS.............................................................................. 24
SECTION 7.08. GOVERNING LAW......................................................................... 24
SECTION 7.09. ASSIGNMENT TO THE TRUSTEE............................................................. 24
SECTION 7.10. NONPETITION COVENANTS................................................................. 24
SECTION 7.11. TERMINATION........................................................................... 24
SECTION 7.12. PUCT CONSENT.......................................................................... 24
SECTION 7.13. EFFECT OF SUBSEQUENT PUCT REGULATIONS................................................. 25
SCHEDULE A TO SERVICING AGREEMENT
ANNEX 1 TO SERVICING AGREEMENT
APPENDIX A - MASTER DEFINITIONS
EXHIBIT A - SERVICER PROCEDURES
TRANSITION PROPERTY SERVICING AGREEMENT dated as of [ ] (this "Agreement")
between CENTERPOINT ENERGY TRANSITION BOND COMPANY II, LLC, a Delaware limited
liability company (the "Issuer"), and CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC,
a Texas limited liability company ("CenterPoint Houston"), as the servicer of
the Transition Property hereunder (together with each successor to CenterPoint
Houston in such capacity pursuant to Section 5.03 or 6.04, the "Servicer").
WHEREAS the Servicer is willing to service the Transition Property
purchased from the Seller by the Issuer;
WHEREAS the Issuer, in connection with ownership of the Transition
Property, desires to engage the Servicer to carry out the functions described
herein;
WHEREAS, the Transition Charges may not be itemized on Customers' bills and
the TC Collections initially will be commingled with other funds collected from
Customers and REPs (as applicable); and
WHEREAS, a number of parties may have an interest in such commingled
collections, and such parties have entered into an Intercreditor Agreement as of
the date hereof that allows the party acting as the Utility (as defined therein)
to allocate the collected, commingled funds according to each interested party's
interest;
WHEREAS, the Financing Order provides that the PUCT, acting through its
authorized legal representative and for the benefit of Texas ratepayers, may
enforce the Servicer's obligations imposed under this Agreement pursuant to the
Financing Order to the extent permitted by law;
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:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. Capitalized terms used but not otherwise defined
in this Agreement have the respective meanings set forth in Appendix A hereto.
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, Appendix, Annex,
Exhibit and Schedule references contained in this Agreement are references to
Sections, Appendices, Annexes, Exhibits and Schedules in 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.
(c) All terms defined in this Agreement have the same defined meanings
when used in any certificate or other document made or delivered pursuant to
this Agreement unless otherwise defined therein.
ARTICLE II
APPOINTMENT AND AUTHORIZATION OF SERVICER
SECTION 2.01. APPOINTMENT OF THE SERVICER; ACCEPTANCE OF APPOINTMENT. The
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 the 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
Transition Property, the Servicer shall be, and hereby is, authorized and
empowered by the Issuer to:
(a) execute and deliver, on behalf of itself or the Issuer, as the
case may be, any and all instruments, documents or notices, and
(b) on behalf of itself or the Issuer, as the case may be, make any
filing and participate in Proceedings related to the duties of the Servicer
hereunder with any governmental authorities, including with the PUCT.
The Issuer shall furnish the Servicer with such documents as have been
prepared by the Servicer for execution by the Issuer, and with such other
documents as may be in the 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, the 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 TRANSITION PROPERTY.
Notwithstanding any other provision contained herein, the Servicer and the
Issuer agree that the Issuer shall have dominion and control over the Transition
Property, and the Servicer, in accordance with the terms hereof, is acting
solely as the servicing agent of the Issuer with respect to the Transition
Property. The Servicer hereby agrees that it shall not take any action that is
not authorized by this Agreement, the Texas Electric Choice Plan or the
Financing Order, that is not consistent with its customary procedures and
practices, or that shall impair the rights of the Issuer with respect to the
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 THE SERVICER. The Servicer, as agent for the Issuer
(to the extent provided herein), shall have the following duties:
(a) Duties of Servicer Generally. The Servicer shall manage, service,
administer and make collections in respect of the Transition Property. The
Servicer's duties will include:
(i) calculating and billing the Transition Charges;
(ii) obtaining meter reads and providing such metering information to
the REPs, as applicable (unless another entity assumes metering
responsibilities in accordance with the Financing Order, applicable tariffs
or the Texas Electric Choice Plan);
(iii) collecting payments of Transition Charges and payments with
respect to Transition Property from all persons or entities responsible for
remitting Transition Charges and other payments with respect to Transition
Property to the Servicer under the Financing Order, the Texas Electric
Choice Plan, PUCT Regulations or applicable tariffs; provided, however, the
Issuer and the Servicer acknowledge and agree that pursuant to the
Intercreditor Agreement, payments in respect of Transition Charges and
Transition Property may be deposited initially into an account held and
processed by CenterPoint Houston in its capacity as the Utility for the
benefit of the Servicer, and that CenterPoint Houston in its individual
capacity may be replaced as the holder of such account by a Replacement
Servicer or Designated Account Holder as those terms are defined and as set
forth more fully in the Intercreditor Agreement;
(iv) posting all TC Collections remitted to the Servicer and posting
all late-payment penalties assessed against REPs (as described in Section
3.02);
(v) responding to inquiries by Customers, REPs, the PUCT or any other
State, local or federal governmental authority with respect to the
Transition Property and the Transition Charges;
(vi) accounting for TC Collections and late-payment penalties of REPs,
investigating and resolving delinquencies (including, where permitted by
the Financing Order, Schedule TC2 and/or PUCT Regulations, terminating
transmission and distribution service for nonpayment of charges),
processing and depositing collections, making periodic remittances to the
Trustee and furnishing periodic reports to the Issuer, the PUCT, the
Trustee and each Rating Agency;
(vii) providing certified calculations and other information
reasonably requested by agents appointed by the Servicer to collect the
charges to enable the agents to perform collection services properly under
the Intercreditor Agreement and monitoring the collections of the agents
for compliance with the Intercreditor Agreement;
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(viii) providing information reasonably requested by CenterPoint
Houston in connection with the allocation of collections between Transition
Charges and Transition Property on one hand, and other charges and fees on
the other;
(ix) monitoring payments by each REP, reviewing reports provided by
each REP and monitoring compliance by each REP with the credit standards
and deposit obligations set forth in the Financing Order;
(x) notifying each REP of any defaults by such REP in its payment
obligations and other obligations (including its credit standards) under
Schedule TC2, and enforcing against such REP at the earliest date permitted
by the Financing Order and Schedule TC2 any remedies provided by such
Schedule TC2, the Financing Order or other applicable law;
(xi) making all filings with the PUCT and taking all other actions
necessary to perfect the Issuer's ownership interests in and the Trustee's
Lien on the Series Trust Estate;
(xii) selling, as the agent for the Issuer, as its interest may
appear, defaulted or written-off accounts in accordance with the Servicer's
usual and customary practices;
(xiii) taking action in connection with Transition Charge Adjustments
and PBRAF Adjustments as is set forth herein; and
(xiv) any other duties specified for a servicer under the Financing
Order, Schedule TC2, the Texas Electric Choice Plan or other applicable
law.
Anything to the contrary notwithstanding, the duties of the Servicer set
forth in this Agreement shall be qualified in their entirety by, and the
Servicer shall at all times comply with, the Financing Order, the Texas Electric
Choice Plan and any PUCT Regulations, orders or directions 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 Issuer, the PUCT, the Trustee and each Rating Agency in
writing of any laws or PUCT Regulations, orders or directions 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 the Issuer, the
Trustee, the PUCT or any Rating Agency, the Servicer shall provide to the
Issuer, the Trustee, the PUCT or such Rating Agency, as the case may be, any
public financial information in respect of the Servicer, or any material
information regarding the Transition Property to the extent it is reasonably
available to the Servicer, that may be reasonably necessary and permitted by law
for the Issuer, the Trustee, the PUCT or the Rating Agency to monitor the
performance by the Servicer hereunder. In addition, so long as any of the
Transition Bonds are Outstanding, the
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Servicer shall provide to the Issuer, to the PUCT and to the 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
Transition Charges applicable to each Customer Class.
SECTION 3.02. COLLECTION AND ALLOCATION OF TRANSITION CHARGES.
(a) The Servicer shall use all reasonable efforts, subject to
applicable law, to collect all amounts owed in respect of Transition Charges and
late-payment penalties (as set forth in Section 3.02(c) below) 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 Transition Charges, except as contemplated in this
Agreement or as required by law or court or PUCT order. The Servicer shall
enforce at the earliest possible date the obligations with respect to the
Transition Charges of each REP and each other Person owing or collecting
Transition Charges, provided that any REP shall be entitled to hold back from
its payment of Transition Charges to the Servicer an allowance for charge-offs
according to the procedure and calculations set forth in the Financing Order,
Schedule TC2 and the Issuer Annex.
(b) If an REP does not pay the full amount it has been billed by the
Servicer, the amount paid by the REP will first be proportioned between the
Transition Charges and other fees and charges (including amounts billed and due
in respect of transition charges associated with transition bonds issued under
other financing orders), other than late fees, and second, any remaining portion
of the payment will be attributed to late fees owed to CenterPoint Houston or
any successor.
(c) Transition Charges must be paid within 35 days following the date
of each billing by the Servicer to the REP ("REP Billing Day"), without regard
to whether or when the REP receives payment from its retail customers. The
Servicer shall accept payment by electronic funds transfer, wire transfer,
and/or check. Payment will be considered received the date the electronic funds
transfer or wire transfer is received by the Servicer or, if payment is made by
check, the date the check clears. The Servicer shall assess and collect a 5%
late-payment penalty (the "Penalty") on all Transition Charges billed to an REP
but not paid by that REP by the close of business on the 35th day after the date
on which the Transition Charges were billed to the REP. Any and all such Penalty
payments shall be paid to the Trustee for deposit in the Collection Account and
shall be applied against Transition Charge obligations. An REP shall not be
obligated to pay the overdue Transition Charges of another REP. If an REP agrees
to assume the responsibility for the payment of overdue Transition Charges as a
condition of receiving the customers of another REP that has decided to
terminate service to those customers for any reason, the new REP shall not be
assessed the Penalty upon such Transition Charges; provided, however, that the
prior REP shall not be relieved of the previously assessed Penalties. Disputes
regarding whether and when an REP has made payment of billed Transition Charges
shall be resolved in accordance with Section 8(b) of the Issuer Annex.
SECTION 3.03. PAYMENT OF TC COLLECTIONS.
(a) The Servicer shall collect and remit to the Trustee for deposit in
the Collection Account on a daily basis in accordance with Section 5.11 the
Transition Charges plus
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Accrued Interest thereon from the date or dates such Transition Charges were
actually received in accordance with Section 3.02 upon receipt of such
collection from any source.
(b) The Servicer agrees and acknowledges that it will hold all TC
Collections and other Transition Property collected by it for the benefit of the
Issuer and the Trustee and that all amounts will be remitted by the Servicer in
accordance with this Agreement without any surcharge, fee, offset, charge or
other deduction other than as expressly permitted in the Financing Order and
without making any claim to reduce its obligation to remit all TC Collections
and any other proceeds of the Transition Property collected by it.
SECTION 3.04. SERVICING AND MAINTENANCE STANDARDS. The Servicer shall, on
behalf of the Issuer:
(a) manage, service, administer and make collections in respect of the
Transition Property with reasonable care and in material compliance with
applicable law, including without limitation all applicable PUCT 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 electric transmission and distribution
industry or that the PUCT has mandated and consistent with the terms and
provisions of the Financing Order, Schedule TC2 and existing law;
(c) use all reasonable efforts, consistent with its customary
servicing procedures, to enforce and maintain the Issuer's and the Trustee's
rights in respect of the Transition Property;
(d) calculate Transition Charges and PBRAFs in compliance with the
Texas Electric Choice Plan, the Financing Order, any PUCT order related to
Transition Charge allocation and any applicable tariffs;
(e) provide all reports to such parties to the Intercreditor Agreement
regarding the Transition Charges and PBRAFs as are necessary to effect
collection, allocation and remittance of payments in respect of Transition
Charges and other collected funds in accordance with this Agreement and the
Intercreditor Agreement; and
(f) make all filings required under the Texas Electric Choice Plan or
the UCC to maintain the perfected security interest of the Trustee in the Series
Trust Estate and use all reasonable efforts to otherwise enforce and maintain
the Trustee's rights in respect of the Transition Property and the Series Trust
Estate;
except where the failure to comply with any of the foregoing would not
materially and adversely affect the Issuer's or the Trustee's respective
interests in the 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 Transition Property, which, in the
Servicer's judgment, may include the taking of legal action pursuant to Section
3.10 hereof or otherwise.
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SECTION 3.05. SERVICER'S CERTIFICATES. The Servicer shall provide to the
Issuer, the PUCT, the Trustee and the Rating Agencies the statements and
certificates specified in the Issuer Annex at the time and in the manner set
forth therein.
SECTION 3.06. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF DEFAULT. The
Servicer shall deliver to the Issuer, to the PUCT, to the Trustee and to each
Rating Agency, on or before March 31 of each year beginning March 31, 2006, an
Officers' Certificate, stating that:
(i) a review of the activities of the Servicer during the preceding
calendar 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, stating that there has been a default and
describing each such default.
SECTION 3.07. ANNUAL REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM REPORT.
(a) The Servicer shall cause a registered independent public
accounting firm (which may also provide other services to the Servicer or the
Seller) to prepare, and the Servicer shall deliver to the Issuer, to the PUCT,
to the Trustee and to each Rating Agency, on or before March 31 of each year,
beginning March 31, 2006, 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 has performed
certain procedures related to financial matters in connection with the
Servicer's compliance with its obligations under this Agreement during the
preceding calendar year (or, in the case of the first Annual Accountant's
Report, the period of time from the Sale Date through December 31, 2005),
identifying the results of such procedures and including any exceptions noted.
In the event such accounting firm requires the Trustee or the Issuer to agree or
consent to the procedures performed by such firm, the Issuer shall direct the
Trustee in writing to so agree; it being understood and agreed that the Trustee
shall deliver such letter of agreement or consent in conclusive reliance upon
the direction of the Issuer, and the Trustee shall not make any independent
inquiry or investigation as to, and shall have no obligation or liability in
respect of, the sufficiency, validity or correctness of such procedures.
(b) The Annual Accountant's Report shall also indicate that the
accounting firm providing such report is independent of the Servicer within the
meaning of the Code of Professional Ethics of the American Institute of
Certified Public Accountants.
SECTION 3.08. TRANSITION PROPERTY DOCUMENTATION. To assure uniform quality
in servicing the Transition Property and to reduce administrative costs, the
Servicer shall keep on file, in accordance with its customary procedures, all
Transition Property Documentation, it being understood that the Servicer is
acting only as the servicing agent and custodian for the Issuer with respect to
the Transition Property Documentation.
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SECTION 3.09. COMPUTER RECORDS; AUDITS OF DOCUMENTATION.
(a) Safekeeping. The Servicer shall maintain accurate and complete
accounts, records and computer systems pertaining to the Transition Property and
the 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) Transition Charges and the TC Collections
from time to time remitted to the Trustee pursuant to Section 5.11 and to enable
the Issuer to comply with this Agreement and the Indenture. The Servicer shall
conduct, or cause to be conducted, periodic audits of the 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 the Issuer and
the Trustee, as pledgee of the Issuer, to verify the accuracy of the Servicer's
record keeping. The Servicer shall promptly report to the Issuer, to the PUCT,
and to the Trustee any failure on the Servicer's part to hold the 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 the Issuer or the Trustee of the Transition Property
Documentation. The Servicer's duties to hold the Transition Property
Documentation on behalf of the Issuer set forth in this Section 3.09, to the
extent such Transition Property Documentation has not been previously
transferred to a successor Servicer, shall terminate three years after the
earlier of the date on which (i) the Servicer is succeeded by a successor
Servicer pursuant to the provisions of this Agreement or (ii) no Transition
Bonds of any Series are Outstanding.
(b) Maintenance of and Access to Records. The Servicer shall maintain
the Transition Property Documentation at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇
or at such other office as shall be specified to the Issuer, to the PUCT and to
the Trustee by written notice not later than 30 days prior to any change in
location. The Servicer shall permit the Issuer and the 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 Transition Property, the
Transition Charges and the Transition Property Documentation. The failure of the
Servicer to provide access to such information as a result of an obligation or
applicable law (including PUCT Regulations) prohibiting disclosure of
information regarding customers shall not constitute a breach of this Section
3.09(b).
(c) Release of Documents. Upon written instruction from the Trustee in
accordance with the Indenture, the Servicer shall release any Transition
Property Documentation to the Trustee, the Trustee's agent or the Trustee's
designee, as the case may be, and to the PUCT at such place or places as the
Trustee may designate, as soon as practicable.
SECTION 3.10. DEFENDING TRANSITION PROPERTY AGAINST CLAIMS. The Servicer
shall, subject to applicable law, institute any action or Proceeding necessary
to compel performance by each REP and each party to the Intercreditor Agreement
(and in the case of each REP at the earliest possible time) of any of their
respective obligations or duties under the Texas Electric Choice Plan, the
Financing Order or the Intercreditor Agreement with respect to the Transition
Property, and the Servicer agrees, subject to applicable law, to take such legal
or administrative actions, including defending against or instituting and
pursuing legal actions and appearing or testifying at hearings or similar
proceedings as may be reasonably necessary to
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block or overturn any attempts to cause a repeal of, modification of, or
supplement to, the Texas Electric Choice Plan or the Financing Order. The costs
of any such action shall be payable from TC Collections as an Operating Expense
(and shall not be deemed to constitute a portion of the Servicing Fee) in
accordance with the Indenture. The Servicer's obligations pursuant to this
Section 3.10 shall survive and continue notwithstanding the fact that the
payment of Operating Expenses pursuant to the Indenture may be delayed (it being
understood that the Servicer may be required initially to advance its own funds
to satisfy its obligations hereunder).
SECTION 3.11. OPINIONS OF COUNSEL. The Servicer shall deliver to the
Issuer, to the PUCT and to the Trustee:
(a) promptly after the execution and delivery of this Agreement and of
each amendment hereto, and promptly after the Sale Date, an Opinion of Counsel
either:
(i) to the effect that, in the opinion of such counsel, all filings,
including filings with the Secretary of State of the State of Texas
pursuant to the Texas Electric Choice Plan and filings pursuant to the UCC,
that are necessary to perfect the transfer and security interests of each
of the Issuer and the Trustee in the Transition Property to which the Sale
Agreement relates have been executed and filed and are in full force and
effect, 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 interests; 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 Sale
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,
including filings with the Secretary of State of the State of Texas
pursuant to the Texas Electric Choice Plan and filings pursuant to the UCC,
that are necessary to fully preserve and protect the interests of each of
the Issuer and the Trustee in the Transition Property to which the Sale
Agreement relates have been executed and filed and are in full force and
effect, 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 interests.
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ARTICLE IV
SERVICES RELATED TO TRANSITION CHARGE ADJUSTMENTS AND PBRAF
ADJUSTMENTS
SECTION 4.01. TRANSITION CHARGE ADJUSTMENTS AND PBRAF ADJUSTMENTS. The
Servicer shall perform the calculations and take the actions relating to
adjusting the Transition Charges and PBRAFs as set forth in the Issuer Annex at
the time and in the manner set forth therein.
ARTICLE V
THE SERVICER
SECTION 5.01. REPRESENTATIONS AND WARRANTIES OF THE SERVICER. The Servicer
makes the following representations and warranties as of the Sale Date, on which
the Issuer has relied and will rely in acquiring Transition Property. The
representations and warranties shall survive the execution and delivery of this
Agreement, the sale of any of the Transition Property to the Issuer and the
pledge thereof to the Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Texas, with the limited liability company power and
authority to own its properties and to conduct its business as such properties
are currently owned and such business is presently conducted and to execute,
deliver and carry out the terms of this Agreement and the Intercreditor
Agreement and has the power, authority and legal right to service the Transition
Property.
(b) Due Qualification. The Servicer 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 (including the servicing of the Transition Property as required
by this Agreement and the Intercreditor 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 the
servicing of the Transition Property).
(c) Power and Authority. The Servicer has the limited liability
company or corporate, as the case may be, power and authority to execute and
deliver this Agreement and the Intercreditor Agreement and to carry out the
terms of each; and the execution, delivery and performance of this Agreement and
the Intercreditor Agreement have been duly authorized by the Servicer by all
necessary limited liability company or corporate, as the case may be, action.
(d) Binding Obligation. This Agreement and the Intercreditor Agreement
both constitute legal, valid and binding obligations of the Servicer enforceable
against the Servicer in accordance with their terms subject to bankruptcy,
receivership, insolvency, 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 court proceeding in
equity or at law).
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(e) No Violation. The consummation of the transactions contemplated by
this Agreement and the Intercreditor Agreement (to the extent applicable to the
Servicer's responsibilities thereunder) and the fulfillment of the terms of each
will not conflict with, result in any breach of any of the terms and provisions
of, or constitute (with or without notice or lapse of time) a default under, the
limited liability company agreement or articles of incorporation or by-laws, as
the case may be, of the Servicer, or any material agreement to which the
Servicer is a party or by which it is bound or result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of any
such agreement (other than any Lien that may be granted under the Basic
Documents or any Lien created pursuant to Section 39.909 of the Texas Electric
Choice Plan); or violate any law or any existing 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 the Issuance Advice Letter, filings with the
PUCT for adjusting Transition Charges and PBRAFs pursuant to Section 4.01 and
the Issuer Annex and filings with the Secretary of State of the State of Texas
under the Texas Electric Choice Plan and Article 9 of the UCC, 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 or the Intercreditor Agreement, the performance by
the Servicer of the transactions contemplated thereby or the fulfillment by the
Servicer of the terms of each, except those that have been obtained or made or
that are required by this Agreement to be made in the future by the Servicer.
(g) No Proceedings. Except as disclosed by the Servicer on Schedule A
hereto, there are no Proceedings pending or, to the Servicer's best 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) seeking any determination or ruling that might materially and
adversely affect the Transition Property or the performance by the Servicer
of its obligations under, or the validity or enforceability against the
Servicer of, this Agreement;
(ii) relating to the Servicer and which might materially and adversely
affect the federal or State income, gross receipts or franchise tax
attributes of the Transition Property or the Transition Bonds; or
(iii) seeking to prevent the issuance of the Transition Bonds or the
consummation of any of the transactions contemplated by this Agreement or
any of the other Basic Documents.
(h) Reports and Certificates. Each report and certificate delivered in
connection with any filing made to the PUCT by the Servicer on behalf of the
Issuer with respect to Transition Charges, Transition Charge Adjustments or
PBRAF Adjustments will be 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
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representation and warranty that such assumptions, forecasts or other
predictions of future events are reasonable based upon historical performance.
SECTION 5.02. INDEMNITIES OF THE 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 AND THE INTERCREDITOR AGREEMENT.
(B) THE SERVICER SHALL INDEMNIFY THE ISSUER AND THE TRUSTEE (FOR
ITSELF AND ON BEHALF OF THE TRANSITION BONDHOLDERS) AND EACH OF THEIR RESPECTIVE
TRUSTEES, MEMBERS, MANAGERS, OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS FOR, AND
DEFEND AND HOLD HARMLESS EACH SUCH PERSON FROM AND AGAINST, ANY AND ALL LOSSES
THAT MAY BE IMPOSED UPON, INCURRED BY OR ASSERTED AGAINST ANY SUCH PERSON AS A
RESULT OF:
(I) THE SERVICER'S WILLFUL MISCONDUCT, BAD FAITH OR 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 THE INTERCREDITOR AGREEMENT;
(II) THE SERVICER'S BREACH OF ANY OF ITS REPRESENTATIONS OR WARRANTIES
IN THIS AGREEMENT OR THE INTERCREDITOR AGREEMENT; OR
(III) LITIGATION AND RELATED EXPENSES RELATING TO ITS STATUS AND
OBLIGATIONS AS SERVICER (OTHER THAN ANY PROCEEDINGS THE SERVICER IS
REQUIRED TO INSTITUTE UNDER THIS AGREEMENT);
PROVIDED, HOWEVER, THAT THE SERVICER SHALL NOT BE LIABLE FOR ANY LOSSES
RESULTING FROM THE BAD FAITH, WILLFUL MISCONDUCT OR NEGLIGENCE OF ANY PERSON
INDEMNIFIED PURSUANT TO THIS SECTION 5.02 (EACH, AN "INDEMNIFIED PERSON") OR
RESULTING FROM A BREACH OF A REPRESENTATION OR WARRANTY MADE BY SUCH INDEMNIFIED
PERSON TO THE SERVICER IN ANY BASIC DOCUMENT THAT GIVES RISE TO THE SERVICER'S
BREACH.
(C) PROMPTLY AFTER RECEIPT BY AN INDEMNIFIED PERSON OF WRITTEN NOTICE
OF ITS INVOLVEMENT IN ANY ACTION, PROCEEDING OR INVESTIGATION, SUCH INDEMNIFIED
PERSON SHALL, IF A CLAIM FOR INDEMNIFICATION IN RESPECT THEREOF IS TO BE MADE
AGAINST THE SERVICER UNDER THIS SECTION 5.02, NOTIFY THE SERVICER IN WRITING OF
SUCH INVOLVEMENT. FAILURE BY AN INDEMNIFIED PERSON TO SO NOTIFY THE SERVICER
SHALL RELIEVE THE SERVICER FROM THE OBLIGATION TO
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INDEMNIFY AND HOLD HARMLESS SUCH INDEMNIFIED PERSON UNDER THIS SECTION 5.02 ONLY
TO THE EXTENT THAT THE SERVICER SUFFERS ACTUAL PREJUDICE AS DETERMINED BY A
COURT OF COMPETENT JURISDICTION 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 BY AN INDEMNIFIED PERSON UNDER THIS SECTION 5.02,
THE SERVICER SHALL BE ENTITLED TO ASSUME THE DEFENSE OF ANY SUCH ACTION,
PROCEEDING OR INVESTIGATION UNLESS (X) SUCH ACTION, PROCEEDING OR INVESTIGATION
EXPOSES THE INDEMNIFIED PERSON TO A RISK OF CRIMINAL LIABILITY OR FORFEITURE,
(Y) THE SERVICER AND SUCH INDEMNIFIED PERSON HAVE A CONFLICT OF INTEREST IN
THEIR RESPECTIVE DEFENSES OF SUCH ACTION, PROCEEDING OR INVESTIGATION OR (Z)
THERE EXISTS AT THE TIME THE SERVICER WOULD ASSUME SUCH DEFENSE AN ONGOING
SERVICER DEFAULT. UPON ASSUMPTION BY THE SERVICER OF THE DEFENSE OF ANY SUCH
ACTION, PROCEEDING OR INVESTIGATION, THE INDEMNIFIED PERSON SHALL HAVE THE RIGHT
TO PARTICIPATE IN SUCH ACTION OR PROCEEDING AND TO RETAIN ITS OWN COUNSEL
(INCLUDING LOCAL COUNSEL), AND THE SERVICER SHALL BEAR THE REASONABLE FEES,
COSTS AND EXPENSES OF SUCH SEPARATE COUNSEL. THE INDEMNIFIED PERSON SHALL NOT
SETTLE OR COMPROMISE OR CONSENT TO THE ENTRY OF ANY JUDGMENT WITH RESPECT TO ANY
PENDING OR THREATENED CLAIM, ACTION, SUIT OR PROCEEDING IN RESPECT OF WHICH
INDEMNIFICATION MAY BE SOUGHT UNDER THIS SECTION 5.02 (WHETHER OR NOT THE
SERVICER IS AN ACTUAL OR POTENTIAL PARTY TO SUCH CLAIM OR ACTION) UNLESS THE
SERVICER AGREES IN WRITING TO SUCH SETTLEMENT, COMPROMISE OR CONSENT AND SUCH
SETTLEMENT, COMPROMISE OR CONSENT INCLUDES AN UNCONDITIONAL RELEASE OF THE
SERVICER FROM ALL LIABILITY ARISING OUT OF SUCH CLAIM, ACTION, SUIT OR
PROCEEDING.
(D) THE SERVICER SHALL INDEMNIFY THE TRUSTEE AND ITS RESPECTIVE
TRUSTEES, OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS FOR, AND DEFEND AND HOLD
HARMLESS EACH SUCH PERSON FROM AND AGAINST, ANY AND ALL LOSSES THAT MAY BE
IMPOSED 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 (I) SHALL BE DUE TO THE
WILLFUL MISCONDUCT, BAD FAITH OR NEGLIGENCE OF THE TRUSTEE OR (II) SHALL ARISE
FROM THE TRUSTEE'S BREACH OF ANY OF ITS REPRESENTATIONS OR WARRANTIES SET FORTH
IN THE INDENTURE; PROVIDED, HOWEVER, THAT THE FOREGOING INDEMNITY IS EXTENDED TO
THE TRUSTEE SOLELY IN ITS INDIVIDUAL CAPACITY AND NOT FOR THE BENEFIT OF THE
TRANSITION BONDHOLDERS OR ANY OTHER PERSON. SUCH AMOUNTS WITH RESPECT TO THE
TRUSTEE SHALL BE DEPOSITED AND DISTRIBUTED IN ACCORDANCE WITH THE INDENTURE.
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(E) THE SERVICER'S INDEMNIFICATION OBLIGATIONS UNDER SECTION 5.02(B)
AND (D) FOR EVENTS OCCURRING PRIOR TO THE REMOVAL OR RESIGNATION OF THE TRUSTEE
OR THE TERMINATION OF THIS AGREEMENT SHALL SURVIVE THE RESIGNATION OR REMOVAL OF
THE TRUSTEE OR THE TERMINATION OF THIS AGREEMENT AND SHALL INCLUDE REASONABLE
COSTS, FEES AND EXPENSES OF INVESTIGATION AND LITIGATION (INCLUDING THE ISSUER'S
AND THE TRUSTEE'S REASONABLE ATTORNEYS' FEES AND EXPENSES).
(F) EXCEPT TO THE EXTENT EXPRESSLY PROVIDED FOR IN THIS AGREEMENT, THE
SALE AGREEMENT OR THE FORMATION DOCUMENTS (INCLUDING THE SERVICER'S CLAIMS WITH
RESPECT TO THE SERVICING FEES AND THE SELLER'S CLAIM FOR PAYMENT OF THE PURCHASE
PRICE OF TRANSITION PROPERTY), THE SERVICER HEREBY RELEASES AND DISCHARGES THE
ISSUER (INCLUDING ITS MEMBERS, MANAGERS, EMPLOYEES AND AGENTS, IF ANY), AND THE
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, SHALL OR MAY HAVE AGAINST ANY
SUCH PERSON RELATING TO THE TRANSITION PROPERTY OR THE SERVICER'S ACTIVITIES
WITH RESPECT THERETO OTHER THAN ANY ACTIONS, CLAIMS AND DEMANDS ARISING OUT OF
THE WILLFUL MISCONDUCT, BAD FAITH OR NEGLIGENCE OF THE RELEASED PARTIES.
(G) THE SERVICER AND THE ISSUER HEREBY ACKNOWLEDGE THAT,
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THE TRUSTEE IS A THIRD-PARTY
BENEFICIARY OF THIS SECTION 5.02 AND IS ENTITLED TO THE BENEFITS OF THE
INDEMNITY FROM THE SERVICER CONTAINED HEREIN AND TO BRING ANY ACTION TO ENFORCE
SUCH INDEMNIFICATION DIRECTLY AGAINST THE SERVICER.
(H) THE SERVICER SHALL INDEMNIFY THE PUCT (FOR THE BENEFIT OF
CUSTOMERS), THE ISSUER, THE TRUSTEE (FOR ITSELF AND ON BEHALF OF THE TRANSITION
BONDHOLDERS), AND EACH OF THEIR RESPECTIVE TRUSTEES, MEMBERS, MANAGERS,
OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS FOR, AND DEFEND AND HOLD HARMLESS EACH
SUCH PERSON FROM AND AGAINST, ANY AND ALL LOSSES THAT MAY BE IMPOSED UPON,
INCURRED BY OR ASSERTED AGAINST ANY SUCH PERSON AS A RESULT OF ANY INCREASE IN
THE SERVICING FEE THAT BECOMES PAYABLE PURSUANT TO SECTION 5.07(B) OF THIS
AGREEMENT AS A RESULT OF A DEFAULT RESULTING FROM THE SERVICER'S WILLFUL
MISCONDUCT, BAD FAITH OR NEGLIGENCE IN PERFORMANCE OF ITS DUTIES OR OBSERVANCE
OF ITS COVENANTS UNDER THIS AGREEMENT. THE INDEMNIFICATION OBLIGATION SET FORTH
IN THIS PARAGRAPH MAY BE ENFORCED BY THE PUCT BUT IS NOT ENFORCEABLE BY ANY REP
OR ANY CUSTOMER. ANY INDEMNITY PAYMENTS MADE TO THE PUCT UNDER THIS
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PARAGRAPH FOR THE BENEFIT OF CUSTOMERS SHALL BE REMITTED TO THE TRUSTEE PROMPTLY
FOR DEPOSIT INTO THE APPLICABLE COLLECTION ACCOUNT.
SECTION 5.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS
OF, THE SERVICER. Any Person:
(a) into which the Servicer may be merged, converted or consolidated
and which succeeds to all or substantially all of the electric transmission and
distribution business of the Servicer (or, if the Servicer's transmission and
distribution business is split, which provides distribution service directly to
a majority of the retail electric customers in the Seller's certificated service
area as it existed on May 1, 1999),
(b) which results from the division of the Servicer into two or more
Persons and which succeeds to all or substantially all of the electric
transmission and distribution business of the Servicer (or, if the Servicer's
transmission and distribution business is split, which provides distribution
service directly to a majority of the retail electric customers in the Seller's
certificated service area as it existed on May 1, 1999),
(c) which may result from any merger, conversion or consolidation to
which the Servicer shall be a party and which succeeds to all or substantially
all of the electric transmission and distribution business of the Servicer (or,
if the Servicer's transmission and distribution business is split, which
provides distribution service directly to a majority of the retail electric
customers in the Seller's certificated service area as it existed on May 1,
1999),
(d) which may purchase or otherwise succeed to the properties and
assets of the Servicer substantially as a whole and which purchases or otherwise
succeeds to all or substantially all of the electric transmission and
distribution business of the Servicer (or, if the Servicer's transmission and
distribution business is split, which provides distribution service directly to
a majority of the retail electric customers in the Seller's certificated service
area as it existed on May 1, 1999), or
(e) which may otherwise purchase or succeed to all or substantially
all of the electric transmission and distribution business of the Servicer (or,
if the Servicer's transmission and distribution business is split, which
provides distribution service directly to a majority of the retail electric
customers in the Seller's certificated service area as it existed on May 1,
1999),
which Person in any of the foregoing cases executes an agreement of assumption
to perform every obligation of the Servicer under this Agreement, shall be the
successor to the Servicer under this Agreement without the execution or filing
of any document or any further act by any of the parties to this Agreement;
provided, however, that:
(i) immediately after giving effect to such transaction, the
representations and warranties made pursuant to Section 5.01 shall be true
and correct and no Servicer Default, and no event that, after notice or
lapse of time, or both, would become a Servicer Default, shall have
occurred and be continuing;
15
(ii) the Servicer shall have delivered to the Issuer and the Trustee
an Officers' Certificate and an opinion of Independent counsel each stating
that such consolidation, merger, conversion or succession and such
agreement of assumption comply with this Section 5.03 and that all
conditions precedent, if any, provided for in this Agreement relating to
such transaction have been complied with;
(iii) the Servicer shall have delivered to the Issuer, the PUCT, the
Trustee and the Rating Agencies an Opinion of Counsel either
(A) stating that, in the opinion of such counsel, all filings to
be made by the Servicer, including filings with the PUCT pursuant to
the Texas Electric Choice Plan and the UCC, that are necessary fully
to preserve and protect the interests of each of the Issuer and the
Trustee in the Transition Property have been executed and filed and
are in full force and effect, and reciting the details of such filings
or
(B) stating that, in the opinion of such counsel, no such action
is necessary to preserve and protect such interests;
(iv) the Rating Agencies shall have received prior written notice of
such transaction and, if such Person is not an Affiliate of CenterPoint
Houston, the Rating Agency Condition shall be satisfied; and
(v) the Servicer shall have delivered to the Issuer, the PUCT, the
Trustee and the Rating Agencies an opinion of independent tax counsel (as
selected by, and in form and substance satisfactory to, the Servicer, and
which may be based on a ruling from the Internal Revenue Service) to the
effect that, for federal income tax purposes, such transaction will not
result in a material adverse federal income tax consequence to the Issuer
or the Transition Bondholders.
The Servicer shall not consummate any transaction referred to in clauses (a),
(b), (c), (d) or (e) above except upon execution of the above-described
agreement of assumption and compliance with clauses (i), (ii), (iii), (iv) and
(v) above. When any Person acquires the properties and assets of the Servicer
substantially as a whole or otherwise becomes the successor to the Servicer in
accordance with the terms of this Section 5.03, then upon the satisfaction of
all of the other conditions of this Section 5.03, the Servicer shall
automatically and without further notice be released from its obligations
hereunder.
SECTION 5.04. ASSIGNMENT OF THE SERVICER'S OBLIGATIONS. Upon written notice
to the Trustee, the PUCT and the Rating Agencies, the Servicer may assign a
portion of its obligations hereunder to an assignee (A) in accordance with the
Intercreditor Agreement with respect to the obligations to maintain and process
any account into which initial collections may be deposited and process payments
in respect of Transition Charges or (B) subject to the satisfaction of Section
5.03.
SECTION 5.05. LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS. The
Servicer shall not be liable to the Issuer, its managers, the Transition
Bondholders, the Trustee or any other person, except as provided under this
Agreement, for any action taken or for
16
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
willful misconduct, bad faith or negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under this
Agreement or the Intercreditor 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 Trustee or on any document of any
kind, reasonably believed to be genuine and to have been signed by the proper
party respecting any matters arising under this Agreement.
Except as provided in this Agreement (including but not limited to Section
3.10 of this Agreement), the Servicer shall not be under any obligation to
appear in, prosecute or defend any Proceeding that is not directly related to
one of the Servicer's enumerated duties in 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; provided, however, that the Servicer may,
in respect of any Proceeding, undertake any reasonable action that is not
specifically identified in this Agreement as a duty of the Servicer but that the
Servicer may deem necessary or desirable in respect of this Agreement and the
rights and duties of the parties to this Agreement and the interests of the
Transition Bondholders under this Agreement. The Servicer's costs and expenses
incurred in connection with any such Proceeding shall be payable from TC
Collections as an Operating Expense (and shall not be deemed to constitute a
portion of the Servicing Fee) in accordance with the Indenture. The Servicer's
obligations pursuant to this Section 5.05 shall survive and continue
notwithstanding the fact that the payment of Operating Expenses pursuant to the
Indenture may be delayed (it being understood that the Servicer may be required
initially to advance its own funds to satisfy its obligations hereunder).
SECTION 5.06. CENTERPOINT HOUSTON NOT TO RESIGN AS SERVICER. Subject to the
provisions of Sections 5.03 and 5.04, CenterPoint Houston shall not resign from
the obligations and duties imposed on it as Servicer under this Agreement unless
the Servicer delivers to the Issuer, the Trustee and the PUCT written notice of
such resignation at the earliest practicable time and, concurrently therewith or
promptly thereafter, an opinion of Independent legal counsel that the Servicer's
performance of its duties under this Agreement shall no longer be permissible
under applicable law. No such resignation shall become effective until a
successor Servicer shall have assumed the servicing obligations and duties
hereunder of the Servicer in accordance with Section 6.04.
SECTION 5.07. SERVICING FEE. (a) The Issuer agrees to pay the Servicer on
each Payment Date, solely to the extent amounts are available therefor in
accordance with the Indenture, the Servicing Fee with respect to all Series of
Transition Bonds. For so long as:
(i) CenterPoint Houston or one of its Affiliates is the Servicer,
(ii) a successor to CenterPoint Houston or one of its Affiliates is
the Servicer due to the operation of the provisions of Section 5.03, or
(iii) any Person is the successor Servicer hereunder pursuant to the
provisions of Section 5.04 if the predecessor Servicer was CenterPoint
Houston or one of its Affiliates,
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the amount of the Servicing Fee paid to the Servicer annually shall equal 0.05%
of the Transition Bond Balance on the Series Issuance Date and shall be prorated
into equal payment amounts based on the number of Payment Dates that are
expected to occur (a) in the remaining portion of the calendar year in which the
Servicer began to provide any of the services set forth in this Agreement
(provided that the Servicing Fee for such time period shall be prorated to the
fraction of a calendar year during which the Servicer provides any of the
services set forth in this Agreement) and (b) in each calendar year thereafter.
(b) In the event that a successor Servicer not an Affiliate of
CenterPoint Houston is appointed in accordance with Section 6.04, the amount of
Servicing Fee paid to the Servicer annually shall be agreed upon by the
successor Servicer and the Trustee but shall in no event exceed 0.60% of the
Transition Bond Balance on the Series Issuance Date without the consent of the
PUCT and shall be prorated into equal payment amounts as set forth in the
preceding paragraph. The foregoing fees constitute a fair and reasonable price
for the obligations to be performed by the Servicer. The Servicer and any
successor Servicer agrees to pay from amounts received as the Servicing Fee all
fees due and owing pursuant to the Intercreditor Agreement, and neither the
Servicer nor any successor Servicer shall seek or be entitled to any other or
additional reimbursement therefor. The Trustee shall not be responsible or
liable for the Servicing Fee or any fees arising from the Intercreditor
Agreement or for any increase or differential in such fees.
(c) The Servicer will be entitled to retain any interest earnings on
such TC Collections prior to remittance to the Collection Account for the
applicable Series; provided, however, that if the Servicer fails to remit the TC
Collections to the Trustee on or before the second business day after the
Servicer received such TC Collections on more than three occasions during the
period that the Transition Bonds of a Series are outstanding, then thereafter
the Servicer will be required to pay the Trustee any actual interest earned on
TC Collections received by the Servicer and invested by the Servicer during each
collection period prior to remittance to the Trustee for so long as that Series
of Transition Bonds remains outstanding. All late payment charges will be
remitted to the Trustee.
SECTION 5.08. SERVICER EXPENSES. Except as otherwise expressly provided in
Sections 3.10 and 5.05, the Servicer shall be required to pay all expenses
incurred by it in connection with its activities hereunder and under the
Intercreditor Agreement, 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, with written notice to the
Trustee and the PUCT, may at any time appoint a subservicer or agent to perform
all or any portion of its obligations as Servicer hereunder; provided, however,
that the Rating Agency Condition shall have been satisfied in connection
therewith; provided further that the Servicer shall remain obligated and be
liable to the Issuer for the servicing and administering of the Transition
Property in accordance with the provisions hereof without diminution of such
obligation and liability by virtue of the appointment of such subservicer or
agent and to the same extent and under the same terms and conditions as if the
Servicer alone were servicing and administering the Transition Property. The
fees and expenses of the subservicer or agent shall be as agreed between the
Servicer and its subservicer or agent from time to time, and none of the Issuer,
the
18
Trustee or the Transition Bondholders shall have any responsibility therefor.
Any such appointment shall not constitute a Servicer resignation under Section
5.06. The Designated Account Holder shall constitute a subservicer for purposes
of this Section 5.09.
SECTION 5.10. NO SERVICER ADVANCES. The Servicer shall not make any
advances of interest on or principal of the Transition Bonds.
SECTION 5.11. REMITTANCES. The Servicer will make periodic payments on
account of TC Collections to the Trustee for deposit in the Collection Account
for the applicable series of Transition Bonds. The Servicer will remit TC
Collections to the Trustee on a daily basis, which daily remittance shall be
made as soon as reasonably practicable but in no event later than the second
Business Day after the Servicer receives those TC Collections.
SECTION 5.12. PROTECTION OF TITLE. The Servicer shall execute and file all
such filings, including filings with the Secretary of State of the State of
Texas pursuant to the Texas Electric Choice Plan and Article 9 of the UCC, and
cause to be executed and filed all such filings, all in such manner and in such
places as may be required by law fully to preserve, maintain and protect the
interests of the Issuer and the Trustee in the Transition Property, including
all filings required under the Texas Electric Choice Plan and Article 9 of the
UCC relating to the transfer of the ownership or security interest in the
Transition Property by the Seller to the Issuer or any security interest granted
by the Issuer in the Transition Property. The Servicer shall deliver (or cause
to be delivered) to the Issuer, the PUCT and the Trustee file-stamped copies of,
or filing receipts for, any document filed as provided above, as soon as
available following such filing.
ARTICLE VI
SERVICER DEFAULT
SECTION 6.01. SERVICER DEFAULT. If any one of the following events (a
"Servicer Default") occurs and is continuing:
(a) any failure by the Servicer to remit to the Trustee, on behalf of
the Issuer, any required remittance by the date that such remittance must be
made that continues unremedied for a period of five Business Days; or
(b) any failure by the Servicer duly to observe or perform in any
material respect any other covenant or agreement of the Servicer set forth in
this Agreement (other than as provided in Section 6.01(a) or (c)) or any other
Basic Document to which it is a party in such capacity, which failure
(i) materially and adversely affects the Transition Property or the
timely collection of the Transition Charges or the rights of the Trustee or
the Transition Bondholders, and
(ii) continues unremedied for a period of 60 days after the earlier to
occur of (A) the Trustee, the PUCT or the Issuer delivers written notice of
such failure to the Servicer or (B) an officer of the Servicer discovers
such failure;
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(c) any failure by the Servicer duly to perform its obligations under
Section 7 of Annex 1 to this Agreement in the time and manner set forth therein,
which failure continues unremedied for a period of five business days;
(d) any representation or warranty made by the Servicer in this
Agreement or any Basic Document proves to have been incorrect when made, which
has a material adverse effect on the Transition Property or the Issuer's
ownership interest therein, the security interest of the Trustee in the
Transition Property, the Issuer, the Transition Bondholders or the investment of
the Transition Bondholders in the Transition Bonds, 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 (with a copy to the
Trustee) by the Issuer, the PUCT or the Trustee or after discovery of such
failure by an officer of the Servicer, as the case may be; or
(e) an Insolvency Event occurs with respect to the Servicer;
then, so long as the Servicer Default shall not have been remedied, and in no
other circumstances, the Trustee may, or shall upon the written instruction of
the Majority Holders, terminate all the rights and obligations (other than the
indemnification obligations set forth in Section 5.02 hereof and the obligation
under Section 6.04 to continue performing its functions as Servicer until a
successor Servicer is appointed) of the Servicer under this Agreement by notice
then given in writing to the Servicer (a "Termination Notice") and the Trustee
shall comply with the provisions of Section 5 of the Intercreditor Agreement.
The Servicer shall notify each Rating Agency promptly upon the Servicer's
receipt of a Termination Notice.
In addition, upon a Servicer Default, the Issuer and the Trustee shall be
entitled to (x) apply to a state district court located in ▇▇▇▇▇▇ County, Texas,
for sequestration and payment to the Trustee of revenues arising with respect to
the Transition Property, (y) foreclose on or otherwise enforce the Lien on and
security interests in the Transition Property and (z) apply to the PUCT for an
order that amounts arising from the Transition Charges be transferred to a
separate account for the benefit of the Transition Bondholders, in accordance
with the Texas Electric Choice Plan.
On or after the receipt by the Servicer of a Termination Notice, all
authority and power of the Servicer under this Agreement, whether with respect
to the Transition Property, the related Transition Charges or otherwise, shall,
upon appointment of a successor Servicer pursuant to Section 6.04 and pursuant
to the provisions of the Intercreditor Agreement, without further action, pass
to and be vested in such successor Servicer and, without limitation, the 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 Transition Property Documentation and
related documents, or otherwise. The predecessor Servicer shall cooperate with
the successor Servicer, the Trustee and the Issuer in effecting the termination
of the responsibilities and rights of the predecessor Servicer under this
Agreement and the Intercreditor 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 Servicer for remittance, or shall thereafter
be received by it with respect to the Transition Property or the related
Transition Charges. As soon as practicable after
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receipt by the Servicer of such Termination Notice, the Servicer shall deliver
the Transition Property Documentation to the successor Servicer. All reasonable
costs and expenses (including attorneys' fees and expenses) incurred in
connection with transferring the Transition Property Documentation to the
successor Servicer and amending this Agreement or the Intercreditor Agreement to
reflect such succession as Servicer pursuant to this Section shall be paid by
the predecessor Servicer upon presentation of documentation of such costs and
expenses. All costs and expenses (including attorneys' fees and expenses)
incurred in connection with transferring the Transition Property Documentation
to the successor Servicer and amending this Agreement or the Intercreditor
Agreement to reflect the succession as Servicer other than pursuant to this
Section shall be paid by the party incurring such costs and expenses.
Termination of CenterPoint Houston's rights as a Servicer shall not terminate
CenterPoint Houston's rights or obligations in its individual capacity under the
Sale Agreement or the Intercreditor Agreement (except rights thereunder deriving
from its rights as the Servicer hereunder).
SECTION 6.02. NOTICE OF SERVICER DEFAULT. The Servicer shall deliver to the
Issuer, to the Trustee, to the PUCT, and to each Rating Agency promptly after
having obtained actual knowledge thereof, but in no event later than two
Business Days thereafter, written notice in an Officers' Certificate of any
event or circumstance 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. The Trustee, with the written
consent of the Majority Holders, may waive in writing in whole or in part any
default by the Servicer in the performance of its obligations hereunder and its
consequences, except a default in making any required remittances to the Trustee
of TC Collections from Transition Property in accordance with Section 5.11 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 Servicer shall continue to perform its functions as Servicer
under this Agreement and shall be entitled to receive the requisite portion of
the Servicing Fee, until a successor Servicer shall have assumed in writing the
obligations of the Servicer hereunder as described below. In the event of the
Servicer's removal or resignation hereunder, the Trustee at the written
direction and with the consent of the Majority Holders shall appoint a successor
Servicer, and the successor Servicer shall accept its appointment by a written
assumption in form acceptable to the Issuer and the Trustee. In no event shall
the Trustee be liable for its appointment of a successor Servicer appointed with
due care. If, within 30 days after the delivery of the Termination Notice, a new
Servicer shall not have been appointed and accepted such appointment, the
Trustee may petition the PUCT or a court of competent jurisdiction to appoint a
successor Servicer under this Agreement. A Person shall qualify as a successor
Servicer only if:
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(i) such Person is permitted under PUCT Regulations to perform the
duties of the Servicer pursuant to the Texas Electric Choice Plan, the
Financing Order and this Agreement,
(ii) either (A) the PUCT has approved the appointment of the successor
Servicer or (B) 45 days have lapsed since the PUCT received notice of
appointment of the successor Servicer and the PUCT has neither approved nor
disapproved that appointment,
(iii) the Rating Agency Condition shall have been satisfied, and
(iv) such Person enters into a servicing agreement with the Issuer
having substantially the same provisions as this Agreement and into the
Intercreditor Agreement (as Additional TC Servicer).
(b) Upon appointment, the successor Servicer shall be the successor in
all respects to the predecessor Servicer under this Agreement and shall be
subject to all the responsibilities, duties and liabilities arising thereafter
relating thereto placed on the predecessor Servicer and shall be entitled to the
Servicing Fee and all the rights granted to the predecessor Servicer by the
terms and provisions of this Agreement.
(c) The successor Servicer may not resign unless it is prohibited from
serving as such by law.
SECTION 6.05. COOPERATION WITH SUCCESSOR. The predecessor Servicer
covenants and agrees with the 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 Servicer and
the Issuer, with the prior written consent of the Trustee, the consent of the
PUCT pursuant to Section 7.12 if the contemplated amendment increases ongoing
qualified costs as defined in the Financing Order and the satisfaction of the
Rating Agency Condition. 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 Trustee shall be entitled to receive and conclusively 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
3.11. The Issuer and the Trustee 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.
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SECTION 7.02. NOTICES. All demands, notices and communications upon or to
the Servicer, the Issuer, the PUCT, the Trustee 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 CenterPoint Houston, ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention: Treasurer;
(b) in the case of the Issuer, to CenterPoint Energy Transition Bond
Company II, LLC, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
Attention: Manager;
(c) in the case of the Trustee, at its Corporate Trust Office;
(d) in the case of Moody's, to ▇▇▇▇▇'▇ Investors Service, Inc., ABS
Monitoring Department, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇;
(e) in the case of Standard & Poor's, to Standard & Poor's, a division
of The ▇▇▇▇▇▇-▇▇▇▇ Companies, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇; and
(f) in the case of Fitch, to Fitch Ratings, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇;
(g) in the case of the PUCT, to ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇, Attention: Executive Director and General Counsel;
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 provided in Sections 5.03 and 5.04 and as provided
in the provisions of this Agreement concerning the resignation or termination of
the Servicer, this Agreement may not be assigned by the Servicer. Any purported
assignment not in compliance with this Agreement shall be void.
SECTION 7.04. LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of the Servicer, the Issuer and, to the
extent provided herein or in the other Basic Documents, Customers and the other
Persons expressly referred to herein and the Trustee, on behalf of itself 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 the Series Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
Notwithstanding anything to the contrary contained herein, for the avoidance of
doubt, any right, remedy or claim to which any Customer may be entitled pursuant
to the Financing Order and this Agreement may be asserted or exercised only by
the PUCT (or by the Attorney General of the State of Texas in the name of the
PUCT) for the benefit of such Customer.
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
23
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 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 7.09. ASSIGNMENT TO THE TRUSTEE. The Servicer hereby acknowledges
and consents to any pledge, assignment and grant of a security interest by the
Issuer to the Trustee pursuant to the Indenture for the benefit of any
Transition Bondholders of all right, title and interest of the Issuer in, to and
under the Transition Property owned by the Issuer and the proceeds thereof and
the assignment of any or all of the Issuer's rights hereunder and under the
Intercreditor Agreement to the Trustee. Notwithstanding such assignment, in no
event shall the Trustee have any liability for the representations, warranties,
covenants, agreements or other obligations of the 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 Issuer.
SECTION 7.10. NONPETITION COVENANTS. Notwithstanding any prior termination
of this Agreement or the Indenture, but subject to a court's rights to order the
sequestration and payment of revenues arising with respect to the Transition
Property pursuant to Section 39.309(f) of the Texas Electric Choice Plan, the
Servicer 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 or 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 7.11. TERMINATION. This Agreement shall terminate when all
Transition Bonds have been retired or redeemed in full.
SECTION 7.12. PUCT CONSENT. Except as specifically set forth in Section
6.04, to the extent the consent of the PUCT is required to effect any amendment
to or modification of this Agreement or any provision of this Agreement,
24
(a) CenterPoint Houston may request the consent of the PUCT by
delivering to the PUCT's executive director and general counsel a written
request for such consent, which request shall contain:
(i) a reference to Docket No. 30485 and a statement as to the possible
effect of the amendment on ongoing qualified costs;
(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 its consent to the proposed amendment or modification or
request additional time;
(b) The PUCT shall, within 30 days of receiving the request for
consent complying with Section 7.12(a) above, either
(i) provide notice of its consent or lack of consent to the person
specified in Section 7.12(a)(iii) above, or
(ii) be conclusively deemed, on the 31st day after receiving the
request for consent, to have consented to the proposed amendment or
modification,
unless, within 30 days of receiving the request for consent complying with
Section 7.12(a) above, the PUCT or its staff delivers to the office of the
person specified in Section 7.12(a)(iii) above a written statement requesting an
additional amount of time not to exceed thirty days in which to consider whether
to consent to the proposed amendment or modification. If the PUCT or its staff
requests an extension of time in the manner set forth in the preceding sentence,
then the PUCT shall either provide notice of its consent or lack of consent to
the person specified in Section 7.12(a)(iii) above no later than the last day of
such extension of time or be conclusively deemed to have consented to the
proposed amendment or modification on the last day of such extension of time.
Any amendment or modification requiring the consent of the PUCT shall become
effective on the later of (i) the date proposed by the parties to such amendment
or modification and (ii) the first day after the expiration of the 30-day period
provided for in Section 7.12(b)(ii), or, if such period has been extended
pursuant thereto, the first day after the expiration of such period as so
extended.
SECTION 7.13. EFFECT OF SUBSEQUENT PUCT REGULATIONS. Notwithstanding
anything to the contrary contained in this Agreement (including Annex 1 hereto),
to the extent the PUCT promulgates any PUCT Regulation permitted by the
Financing Order or the Texas Electric Choice Plan whose effect is to modify or
supplement any provision of this Agreement relating to REP standards, this
Agreement shall be deemed to have been so modified or supplemented on the
effective date of such regulation, and all other provisions contained herein
shall be deemed modified accordingly without the necessity of any further action
by any party hereto. The Servicer will notify the Issuer and the Rating Agencies
of any such PUCT Regulation and the corresponding modification of or supplement
to this Agreement promptly upon obtaining knowledge thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
CENTERPOINT ENERGY TRANSITION BOND
COMPANY II, LLC
By: _________________________________
Name:
Title:
CENTERPOINT ENERGY HOUSTON ELECTRIC,
LLC, as Servicer
By: _________________________________
Name:
Title:
Acknowledged and Accepted:
____________________________________,
not in its individual capacity but solely as
Trustee on behalf of the Holders
of the Transition Bonds
By: _______________________________
Name:
Title:
26
SCHEDULE A
TO
TRANSITION PROPERTY SERVICING AGREEMENT
Proceedings pending or, to the Servicer's best knowledge, threatened before any
court, federal or State regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or its
properties seeking any determination or ruling that might materially and
adversely affect the Transition Property or the performance by the Servicer of
its obligations under, or the validity or enforceability against the Servicer
of, this Agreement:
[ ]
27
ANNEX 1
TO
TRANSITION PROPERTY SERVICING AGREEMENT
The Servicer agrees to comply with the following with respect to
CenterPoint Energy Transition Bond Company II, LLC (the "Issuer"):
SECTION 1. DEFINITIONS. Capitalized terms used herein and not otherwise
defined shall have the meanings set forth in Appendix A to the Transition
Property Servicing Agreement dated as of [ ] between the Issuer and CenterPoint
Houston, as Servicer.
SECTION 2. CHANGES TO PBRAF METHODOLOGY PURSUANT TO PUCT ORDER. CenterPoint
Houston's methodology for allocating qualified costs and developing the initial
PBRAFs will not be changed except in the limited circumstance where total retail
stranded costs on a statewide basis exceed $5 billion as described in Part D of
Section 6 of Schedule TC2. The Servicer shall file the adjustments required
therein, within 45 days after the PUCT issues any order that causes the total
statewide stranded costs (determined pursuant to Section 39.253(f) of the Texas
Electric Choice Plan) to exceed $5 billion or changes the amount by which the
total statewide stranded costs (determined pursuant to Section 39.253(f) of the
Texas Electric Choice Plan) exceed $5 billion.
SECTION 3. CALCULATION DATE STATEMENTS TO ISSUER AND TRUSTEE. For each
Calculation Date, the Servicer shall provide to the Issuer, the PUCT, the
Trustee and the Rating Agencies a statement indicating:
(a) the Transition Bond Balance and the Projected Transition Bond
Balance as of the immediately preceding Payment Date,
(b) the amount on deposit in the Capital Subaccount and the Required
Capital Amount as of the immediately preceding Payment Date;
(c) the Projected Transition Bond Balance and the Servicer's
projection of the Transition Bond Balance on the Payment Date immediately
preceding the next succeeding Adjustment Date; and
(d) the Servicer's projection of the amount on deposit in the Excess
Funds Subaccount for the Payment Date immediately preceding the next
succeeding Adjustment Date.
SECTION 4. CALCULATION DATE ACTIVITY BETWEEN THE SERVICER AND REPS.
(a) Each REP will be permitted to hold back an allowance for
charge-offs in its payments to the Servicer. Such charge-off rate will be
recalculated each year in connection with the annual true-up procedure. Until
the first Calculation Date, each REP that has chosen to hold back an allowance
for charge-offs in its payments of TC Collections to the Servicer in accordance
with the Financing Order and Schedule TC2 will remit to the Servicer TC
Collections based on the charge-off percentage in effect for transition charges
related to the
1
transition bonds issued by CenterPoint Energy Transition Bond Company, LLC on
October 24, 2001. Thereafter, on or about each Calculation Date, the REP and the
Servicer will be responsible for reconciling the amounts held back with amounts
actually written off as uncollectible in accordance with the terms agreed to by
the REP and the Servicer, provided that:
(i) The REP's right to reconciliation for write-offs will be limited
to customers whose service has been permanently terminated and whose entire
accounts (i.e., all amounts due the REP for its own account as well as the
portion representing Transition Charges) have been written off.
(ii) The REP's recourse will be limited to a credit against future
Transition Charge payments unless the REP and the Servicer agree to
alternative arrangements, but in no event will the REP have recourse to the
Trustee, the Issuer or the Issuer's funds for such payments.
(iii) The REP shall provide information on a timely basis to the
Servicer so that the Servicer can include the REP's default experience and
any subsequent credits into its calculation of the adjusted Transition
Charge rates for the next Transition Charge billing period and the REP's
rights to credits will not take effect until after such adjusted Transition
Charges rates have been implemented.
(b) If the REP has held back less than the amount actually written off
as uncollectible during the time period, the REP shall be entitled to a credit
against future Transition Charge payments over the twelve-month period
immediately following the next Adjustment Date in the amount of the hold-back
shortfall and no other remedy. If the REP has held back more than the amount
actually written off as uncollectible during the time period, the permitted
charge-off percentage shall be adjusted so that it is projected that the REP
will remit to the Servicer the amount of such underpayment of TC Collections
over the twelve-month period immediately following the next upcoming Adjustment
Date.
(c) The Servicer will incorporate the REPs' Customer default
information and any subsequent credits to the REPs for Transition Charges
already paid by the REPs to the Servicer in its calculation of the Transition
Charge Adjustments on the Calculation Date. The REPs' right under this Section 4
to receive a credit against future payments of TC Collections to the Servicer
shall not take effect until after the next upcoming Adjustment Date.
(d) In any case the Servicer shall ▇▇▇▇ to and collect from each REP
such REP's share of the amount required to meet the requirements of the
Financing Order, provided that in addition each billing shall also include the
amount of the holdback allowed for charge-offs.
SECTION 5. REMITTANCE STATEMENTS. On or before each remittance by the
Servicer to the Trustee, the Servicer shall prepare and furnish to the Issuer,
the PUCT and the Trustee a statement setting forth the aggregate amount remitted
or to be remitted by the Servicer to the Trustee for deposit on such date
pursuant to the Indenture.
SECTION 6. PAYMENT DATE STATEMENTS. By 12:00 noon Central Time on the
Business Day immediately preceding each Payment Date, the Servicer shall prepare
and furnish
2
to the Issuer, the PUCT, the Trustee and the Rating Agencies a [Semiannual]
Servicer's Certificate setting forth the transfers and payments to be made in
respect of such Payment Date pursuant to Section 8.02(d) of the Indenture and
the amounts thereof and the amounts to be paid to Holders of Transition Bonds of
each Series pursuant to Section 8.02(e) of the Indenture.
SECTION 7. TRANSITION CHARGE AND PBRAF ADJUSTMENTS.
(a) Prior to each Calculation Date, the Servicer shall calculate
(i) the PBRAF Adjustments to be made in accordance with the
methodology set forth in Schedule TC2, as may be modified from time to time
by order from the PUCT,
(ii) the Transition Bond Balance as of each Calculation Date (a
written copy of which shall be delivered by the Servicer to the Trustee and
the PUCT within five business days following such Calculation Date), and
(iii) the Transition Charge Adjustment with respect to the Transition
Property for the twelve-month period preceding and including the next
upcoming Adjustment Date and each subsequent twelve-month period, such that
the Servicer projects that TC Collections therefrom allocable to the Issuer
will be sufficient so that:
(A) the Transition Bond Balance on the Payment Date immediately
preceding the next Adjustment Date will equal the Projected Transition
Bond Balance as of such date or, if earlier with respect to any Series
or Tranche of Transition Bonds, by the Expected Final Payment Date
therefor, taking into account any amounts on deposit in the Excess
Funds Subaccount,
(B) the amount on deposit in the Capital Subaccount on the
Payment Date immediately preceding the next Adjustment Date, or if
earlier with respect to the Series [ ] Transition Bonds or any Tranche
thereof, by the Expected Final Payment Date therefor, will equal the
Required Capital Amount for such date, taking into account any amounts
on deposit in the Excess Funds Subaccount and taking into account any
prior withdrawals of interest or earnings on deposits in the Capital
Subaccount used to meet payment obligations on the Series [ ]
Transition Bonds,
(C) thereafter, the TC Collections will provide for amortization
of the remaining outstanding principal amount of the Series [ ]
Transition Bonds in accordance with the Expected Amortization Schedule
therefor and payment of interest on the Series [ ] Transition Bonds
when due,
(D) the Servicer can reconcile past overpayments and
underpayments by the REP of Transition Charges arising out of
hold-backs for charge-offs in accordance with Section 4 of this Annex,
(E) the Servicer can recover out of TC Collections the interest
paid to an REP arising out of a dispute between the Servicer and such
REP pursuant to Section 8(b) of this Annex for which the Servicer's
claim to the funds in dispute was not clearly unfounded, and
3
(F) the fees and expenses of the Servicer, the Trustee, the
independent managers of the Issuer and the Administrator and other
fees expenses, charges and costs authorized in the Financing Order
will be paid.
(b) On each Calculation Date, the Servicer shall make annual
reconciliation filings with the PUCT for that Calculation Date. The Servicer
shall promptly thereafter provide notice and a copy of such filings to each
Rating Agency. The Servicer's Calculation Date filings shall include:
(i) any PBRAF Adjustments to take effect on the next Adjustment Date
(in which case, the Servicer shall provide notice of such filing to all
parties in PUCT Docket No. 30485 and shall participate in a contested case
proceeding at the PUCT, the purpose of which will be to determine whether
any proposed adjustment complies with the Financing Order, as set forth
therein), and
(ii) a tariff supplement setting forth Transition Charge Adjustments
to become effective on the next Adjustment Date and supporting data,
including the calculation of the Transition Charge Adjustments.
(c) The Servicer shall calculate any interim Transition Charge
Adjustments to be requested between Calculation Dates to correct
under-collection or over-collection of Transition Charges, as set forth in the
Financing Order and Schedule TC2, in order to provide for the timely payment of
the Transition Bonds. More particularly, the Servicer shall calculate and file
for interim Transition Charge Adjustments:
(i) if the Servicer determines that, as of any Payment Date, there is
more than a 5% variation between (A) the sum of the outstanding principal
amount of each Series of Transition Bonds, taking into account the amount
in the related Excess Funds Subaccount available to make principal payments
on such Series of Transition Bonds at the next payment date, and (B) the
sum of the projected outstanding principal amount of each Series of
Transition Bonds for that Payment Date set forth in the Expected
Amortization Schedule;
(ii) as needed to meet any Rating Agency requirement that the
Transition Bonds of that Series be paid in full at scheduled maturity; or
(iii) to correct any undercollection of Transition Charges, regardless
of cause, in order to assure timely payment of the Transition Bonds of that
Series based on Rating Agency and Transition Bondholder considerations,
including a mandatory interim Transition Charge Adjustment in connection
with each semi-annual Payment Date if the Servicer forecasts that TC
Collections during the next semi-annual payment period will be insufficient
to make all scheduled payments of interest, principal and other amounts in
respect of the Transition Bonds of that Series and to replenish the Capital
Subaccount for that Series to the Required Capital Amount.
In the event an interim Transition Charge Adjustment is permitted
under Schedule TC2, the Servicer will file for such an adjustment with the PUCT
not less than fifteen days prior to the proposed Interim Adjustment Date. The
Servicer shall promptly thereafter provide notice and a copy of such filings to
each Rating Agency. The Servicer will make the interim filing described in this
Section 7(c) no more frequently than every three months if quarterly payments
are made to Transition Bond Owners and no more frequently than every six months
(except that interim filings will be made no more frequently than every three
months in the fourteenth and fifteenth years of the Transition Bonds).
(d) The Servicer shall take reasonable steps to monitor the Transition
Charge rate for each class of Customers to determine whether any such rate
exceeds the maximum rate that class of Customers is obligated to pay under
Section 39.202(a) of the Texas Electric Choice Plan. If such maximum rate is
being exceeded for any class of Customers ("Affected Class"), then the Servicer
shall cause the billing entity for Customers in the Affected Class to apply the
maximum rate allowed under that section to the Affected Class, and the rates for
all other classes of Customers ("Remaining Classes") shall be recalculated using
the maximum rate for the Affected Class. The Servicer will allocate any
resulting deficiency in Transition Charges to the Remaining Classes based on the
ratio of the PBRAFs then in effect.
(e) On each Adjustment Date and Interim Adjustment Date, the Servicer
shall
(i) take all reasonable actions and make all reasonable efforts in
order to effectuate all adjustments approved by the PUCT to the Transition
Charges and/or PBRAFs, and
4
(ii) promptly send to the Trustee copies of all material notices and
documents relating to such adjustments.
SECTION 8. OTHER ACTIVITY BETWEEN THE SERVICER AND REPS.
(a) In the event an REP provides a cash deposit to the Trustee in the
form of up to two months' maximum expected transition charge collections, a
surety bond or letter of credit (each an "REP Deposit") pursuant to the
Financing Order and Schedule TC2,
(i) the Servicer shall agree with the REP as to the size of the
initial REP Deposit,
(ii) no more frequently than quarterly, upon the request of either the
REP or the Servicer, the Servicer shall cooperate with the REP as required
by the Financing Order and Schedule TC2 to ensure that the REP Deposit
accurately reflects up to two months' maximum TC Collections. Within 10
days following the review by the REP and Servicer of the size of the REP
Deposit, either the REP shall remit to the Trustee the amount of any
shortfall in the REP Deposit or the Servicer shall instruct the Trustee to
remit to the REP any portion of the REP Deposit no longer required to be on
deposit,
(iii) The Servicer shall instruct the Trustee in writing to remit to
the REP the REP Deposit, plus any investment earnings thereon, upon the
Final Maturity Date of the final Tranche, if applicable, of the final
Series of Transition Bonds except such portion of the REP Deposit as was
utilized in satisfaction of the REP's obligation to remit billed Transition
Charges, and
(iv) The Servicer shall instruct the Trustee to remit to the REP the
REP Deposit, plus any investment earnings thereon, within 30 days of the
date on which the REP Deposit is no longer required under the Financing
Order or Schedule TC2.
(b) In the event an REP disputes any amount of billed Transition
Charges, the Servicer shall require the REP to pay the disputed amount under
protest within the time for payment set forth in Section 3.02 of this Agreement.
The Servicer shall attempt to resolve informally the dispute with the REP, or
any dispute related to the date of receipt of Transition Charge payments,
Penalties, or the size of the required REP Deposit. If the REP and the Servicer
cannot reach an informal resolution to the dispute, either party may file a
complaint with the PUCT as set forth in the Financing Order and Schedule TC2. If
the REP prevails in the informal dispute process or before the PUCT, the
Servicer shall provide the REP with a refund of the disputed amount paid to the
Servicer plus interest at a rate approved by the PUCT. As provided in the
Financing Order, Schedule TC2 and Section 7(a)(iii)(F) of this Annex, interest
paid by the Servicer shall be recoverable through Transition Charges if the
Servicer's claim to the funds is not clearly unfounded. In addition, as provided
in the Financing Order and Schedule TC2, the Servicer shall not be required to
pay interest to the REP if the Servicer has received inaccurate metering data
from another entity providing competitive metering services pursuant to the
Texas Electric Choice Plan.
5
(c) The Servicer shall adhere to the instructions of an REP that bills
Customers for Transition Charges to terminate transmission and distribution
service to a Customer for nonpayment by the Customer pursuant to the Financing
Order and Schedule TC2.
SECTION 9. OTHER ACTIVITIES BY THE SERVICER.
(a) In addition to the obligation set forth in Section 8(c) of this
Annex, the Servicer shall have the rights and obligations to terminate electric
service for non-payment of Transition Charges under the circumstances set forth
in Schedule TC2 and PUCT Regulations.
(b) If an REP fails to remit payment in full of all Transition Charges
billed to such REP by the day that is 45 calendar days after the REP Billing
Day, the Servicer shall, in addition to assessing the Penalty against such REP
described in Section 3.02(c) of the Servicing Agreement, direct the Trustee by
written instruction to apply from such REP's REP Deposit (by making a withdrawal
from a deposit account, a demand under a surety bond or a guarantee, and/or a
draw under a letter of credit, as applicable) into the Collection Account the
lesser of the amount of Transition Charges such REP has failed to remit or the
amount of the REP Deposit. The Servicer shall notify the REP of such withdrawal,
demand and/or draw from the REP Deposit to the Collection Account and instruct
the REP to remit immediately the amount of such withdrawal, demand and/or draw
to the Trustee for replenishment of such REP's REP Deposit. The Servicer shall
require the REP to immediately replenish its REP Deposit and shall avail itself
of such legal remedies as may be appropriate to collect any remaining unpaid
Transition Charges and associated penalties due to the Servicer after
application of the REP Deposit, in accordance with the Financing Order and
Schedule TC2.
(c) If an REP is in default pursuant to Section [ ] of Schedule TC2
and Findings of Fact [ ] of the Financing Order (such default an "REP Default"),
the Servicer shall perform such duties as are required of the Servicer therein,
including but not limited to the following:
(i) in the event the REP in REP Default seeks to implement alternative
arrangements with the Servicer regarding the billing and collection of
Transition Charges pursuant to Section [ ] of Schedule TC2 and Finding of
Fact [ ] of the Financing Order, the Servicer shall consider proposals from
such REP but shall not accept any proposal, and no proposal shall be deemed
mutually suitable and agreeable, other than the options set forth in
Section [ ] of Schedule TC2 unless (i) the Servicer is directed promptly in
writing by the Trustee to accept a proposal of such REP following the
approval of such proposal by the Majority Holders, (ii) such proposal would
not materially and adversely affect the interests of the Transition
Bondholders and (iii) the Rating Agency Condition has been satisfied; and
(ii) in the event the REP in REP Default fails to immediately select
and implement an alternative method of billing and collecting Transition
Charges as specified in Section [ ] of Schedule TC2 and Finding of Fact [ ]
of the Financing Order or fails to adequately meet its responsibilities
thereunder, the Servicer shall immediately allow the Provider of Last
Resort or another qualified REP of a Customer's choosing to
6
immediately assume responsibility for the billing and collection of
Transition Charges from such Customer.
(d) In the event the Provider of Last Resort defaults or is ineligible
to provide billing and collection of Transition Charges when requested by a
Customer or the Servicer, as applicable, the Servicer shall assume
responsibility for billing and collection of Transition Charges until a new
Provider of Last Resort is named by the PUCT or the Customer requests the
services of another REP, in accordance with Schedule TC2 and PUCT Regulations.
In any case, the Servicer shall enforce the obligations, and exercise its
remedies against, each REP including any Provider of Last Resort, as permitted
under the Financing Order and Schedule TC2.
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APPENDIX A
DEFINITIONS
The definitions contained in this Appendix A are applicable to the singular
as well as the plural forms of such terms.
"Accrued Interest" means interest accrued at the Federal Funds Rate on
amounts held by the Servicer prior to, on, or after the date such amounts are
due and payable to the Trustee under this Agreement.
"Act" has the meaning specified in Section 11.03 of the Indenture.
"Additional TC Servicer" has the meaning specified in the Intercreditor
Agreement.
"Adjustment Date" means the date other than an Interim Adjustment Date on
which any Transition Charge Adjustment (other than an interim (non-annual)
Transition Charge Adjustment) and/or any PBRAF Adjustment, as applicable,
becomes effective. The first Adjustment Date will be on or about [ ], and all
subsequent Adjustment Dates shall be on or about the same day of the year in
subsequent years.
"Administration Agreement" means the Administration Agreement dated as of
[ ], between CenterPoint Houston, as Administrator, and the Issuer, as the same
may be amended and supplemented from time to time.
"Administrator" means CenterPoint Houston as administrator under the
Administration Agreement and each successor to or assignee of CenterPoint
Houston in the same capacity.
"Affiliate" means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, control, when used with respect to any
specified Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms controlling and controlled
have meanings correlative to the foregoing.
"Annual Accountant's Report" has the meaning assigned to that term in
Section 3.07 of the Servicing Agreement.
"Basic Documents" means the Issuer LLC Agreement, the Issuer Certificate of
Formation, the Sale Agreement, the Servicing Agreement, the Intercreditor
Agreement, each Swap Agreement (as defined in the Indenture) relating to the
Series [ ] Transition Bonds, the Administration Agreement, the Indenture, the
Series Supplement, the Underwriting Agreement relating to the Series [ ]
Transition Bonds and the ▇▇▇▇ of Sale.
"▇▇▇▇ of Sale" has the meaning assigned to that term in the Sale Agreement.
8
"Book-Entry Transition Bonds" means beneficial interests in the Transition
Bonds, ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.11 of the Indenture.
"Business Day" means any day other than a Saturday or Sunday or a day on
which banking institutions in the City of Houston, Texas, or in the City of New
York, New York, are required or authorized by law or executive order to remain
closed.
"Calculation Date" means, with respect to the Series [ ] Transition Bonds,
the date on which the calculations and filings set forth in the Issuer Annex
will be made each year. The first Calculation Date will be no later than [ ], if
the Servicer requests only Transition Charge Adjustments, and no later than [ ],
if the Servicer requests any PBRAF Adjustments (whether or not the Servicer also
requests Transition Charge Adjustments). Subsequent Calculation Dates will be on
or about the same applicable day of the year in subsequent years.
"Capital Subaccount" has the meaning specified in Section 8.02(a) of the
Indenture.
"CenterPoint Houston" means CenterPoint Energy Houston Electric, LLC, a
Texas limited liability company, or its successor.
"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
"Collection Account" has the meaning specified in Section 8.02(a) of the
Indenture.
"Collection Period" means the period from and including the first day of a
calendar month to but excluding the first day of the next calendar month.
"Corporate Trust Office" means the principal office of the Trustee at which
at any particular time its corporate trust business shall be administered, which
office as of the date of the execution of the Indenture is located at Trust and
Securities Services, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇ NYC 60-2606, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, Attn: Structured Finance Services, or at such other address as the
Trustee may designate from time to time by notice to the Transition Bondholders
and the Issuer, or the principal Corporate Trust Office of any successor Trustee
(the address of which the successor Trustee will notify the Transition
Bondholders and the Issuer).
"Customer Class" means each of the Transition Charge classes specified in
the Financing Order.
"Customers" means each Person from whom CenterPoint Houston is authorized
to recover Qualified Costs as defined in and pursuant to the Texas Electric
Choice Plan or any PUCT Regulation, as more specifically set forth in the
Indenture.
9
"Default" means any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.
"Designated Account Holder" has the meaning specified in the Intercreditor
Agreement.
"DTC" means The Depository Trust Company.
"Event of Default" has the meaning specified in Section 5.01 of the
Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expected Amortization Schedule" means, with respect to the Series [ ]
Transition Bonds or any Tranche thereof, the expected amortization schedule for
principal thereof, as specified in the Series Supplement.
"Expected Final Payment Date" means, with respect to the Series [ ]
Transition Bonds or, if applicable, each Tranche thereof, the date when all
interest and principal is scheduled to be paid for that Series or Tranche in
accordance with the Expected Amortization Schedule, as specified in the Series
Supplement.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day on such
transactions received by the Servicer from three federal funds brokers of
recognized standing selected by it.
"Final Maturity Date" means, for the Series [ ] Transition Bonds or, if
applicable, each Tranche thereof, the date by which all principal and interest
on the Transition Bonds is required to be paid, as specified in the Series
Supplement.
"Financing Order" means the Financing Order issued by the PUCT on March 16,
2005 in Docket No. 30485 pursuant to the Texas Electric Choice Plan.
"Fitch" means Fitch Ratings or any successor thereto.
"Formation Documents" means, collectively, the Issuer Certificate of
Formation, the Issuer LLC Agreement and any other document pursuant to which the
Issuer is formed or governed, 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 Tranche is registered on the Transition Bond
Register.
"Indenture" means the Indenture, dated as of [ ], between the Issuer and
the Trustee and the Series Supplement thereto relating to the Series [ ]
Transition Bonds (including the forms and terms of the Series [ ] Transition
Bonds established thereunder), as the same may be amended and supplemented with
respect to the Series [ ] Transition Bonds from time to time.
"Independent" means, when used with respect to any specified Person, that
the Person
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(a) is in fact independent of the Issuer, any other obligor upon the
Transition Bonds, the Servicer and any Affiliate of any of the foregoing
Persons,
(b) does not have any direct financial interest or any material
indirect financial interest in the Issuer, any such other obligor, the
Servicer or any Affiliate of any of the foregoing Persons and
(c) is not connected with the Issuer, any such other obligor, the
Servicer or any Affiliate of any of the foregoing Persons as an officer,
employee, promoter, underwriter, trustee, partner, director or person
performing similar functions.
"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 such debts become
due, or the taking of action by such Person in furtherance of any of the
foregoing.
"Intercreditor Agreement" means the Intercreditor Agreement dated as of
[ ], among the Issuer, CenterPoint Houston and CenterPoint Energy Transition
Bond Company, LLC, each in the capacities stated therein, as the same may be
amended from time to time.
"Interim Adjustment Date" means the effective date of any interim
(non-annual) Transition Charge Adjustment.
"Issuance Advice Letter" means the issuance advice letter submitted to the
PUCT by CenterPoint Houston pursuant to the Financing Order in connection with
the issuance of the Series [ ] Transition Bonds.
"Issuer" means CenterPoint Energy Transition Bond Company II, LLC, a
Delaware limited liability company, or any successor thereto pursuant to the
Indenture.
"Issuer Annex" means Annex 1 of the Servicing Agreement.
11
"Issuer Certificate of Formation" means the Certificate of Formation of the
Issuer that was filed with the Delaware Secretary of State on [ ], as the same
may be amended and restated from time to time.
"Issuer LLC Agreement" means the Limited Liability Company Agreement
between the Issuer and CenterPoint Houston, as sole Member, dated as of [ ], as
the same may be amended and supplemented from time to time.
"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.
"Majority Holders" means the Holders of a majority of the Outstanding
Amount of the Series [ ] Transition Bonds.
"Moody's" means ▇▇▇▇▇'▇ Investors Service Inc., or any successor thereto.
"Officers' Certificate" means a certificate signed, in the case of
CenterPoint Houston, by:
(a) any manager, the chairman of the board, the chief executive
officer, the president, the vice chairman or any executive vice president,
senior vice president or vice president; and
(b) the treasurer, any assistant treasurer, the secretary or any
assistant secretary.
"Operating Expenses" means, with respect to the Issuer, all fees, costs and
expenses owed by the Issuer with respect to the Series [ ] Transition Bonds,
including all amounts owed by the Issuer to the Trustee, the Servicing Fee, the
fees and expenses relating to the Series [ ] Transition Bonds payable by the
Issuer to the Administrator under the Administration Agreement, the fees and
expenses relating to the Series [ ] Transition Bonds payable by the Issuer to
the Independent managers of the Issuer, legal fees and expenses of the Servicer
pursuant to this Servicing Agreement, and legal and accounting fees, costs and
expenses of the Issuer relating to the Series [ ] Transition Bonds.
"Opinion of Counsel" means one or more written opinions of counsel who may
be an employee of or counsel to CenterPoint Houston and the Issuer, which
counsel shall be reasonably acceptable to the Trustee, the Issuer or the Rating
Agencies, as applicable, and which shall be in form reasonably satisfactory to
the Trustee, if applicable.
"Outstanding" with respect to Transition Bonds means, as of the date of
determination, all Transition Bonds theretofore authenticated and delivered
under the Indenture except:
(a) Transition Bonds theretofore canceled by the Transition Bond
Registrar or delivered to the Transition Bond Registrar for cancellation;
12
(b) Transition Bonds or portions thereof the payment for which money
in the necessary amount has been theretofore deposited with the Trustee or
any Paying Agent in trust for the Holders of such Transition Bonds;
provided, however, that if such Transition Bonds are to be redeemed, notice
of such redemption has been duly given pursuant to the Indenture or
provision therefor, satisfactory to the Trustee; and
(c) Transition Bonds in exchange for or in lieu of other Transition
Bonds which have been authenticated and delivered pursuant to the Indenture
unless proof satisfactory to the Trustee is presented that any such
Transition Bonds are held by a bona fide purchaser;
provided that in determining whether the Holders of the requisite Outstanding
Amount of the Transition Bonds or any Series or Tranche thereof have given any
request, demand, authorization, direction, notice, consent or waiver hereunder
or under any Basic Document, Transition Bonds owned by the Issuer, any other
obligor upon the Transition Bonds, CenterPoint Houston or any Affiliate of any
of the foregoing Persons shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be fully protected in
relying upon any such request, demand, authorization, direction, notice, consent
or waiver, only Transition Bonds that a Responsible Officer of the Trustee knows
to be so owned shall be so disregarded. Transition Bonds so owned that have been
pledged in good faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act with respect to
such Transition Bonds and that the pledgee is not the Issuer, any other obligor
upon the Transition Bonds, the Servicer or any Affiliate of any of the foregoing
Persons.
"Outstanding Amount" means the aggregate principal amount of all
Outstanding Series [ ] Transition Bonds or, if the context requires, all
Outstanding Transition Bonds of a Tranche of Series [ ] Transition Bonds
Outstanding at the date of determination.
"Paying Agent" means the Trustee or any other Person that meets the
eligibility standards for the Trustee specified in Section 6.11 of the Indenture
and is authorized by the Issuer to make the payments of principal of or premium,
if any, or interest on the Transition Bonds on behalf of the Issuer.
"Payment Date" means, with respect to the Series [ ] Transition Bonds or,
if applicable, each Tranche thereof, the date or dates specified as Payment
Dates for such Series or Tranche in the Series Supplement therefor, provided
that if any such date is not a Business Day, the Payment Date shall be the
Business Day immediately succeeding such date.
"PBRAF" means the periodic billing requirement allocation factor used to
allocate Transition Charges among different classes of Customers, as set forth
in Schedule TC2 and any other applicable tariff or order.
"PBRAF Adjustment" means each adjustment to any PBRAF made in accordance
with Section 4.01 of the Servicing Agreement, Schedule TC2 and any other
applicable tariff, any order issued by the PUCT pursuant to Section 39.253 of
the Texas Electric Choice Plan, and the Issuer Annex.
13
"Penalty" means a late-fee penalty assessed by the Servicer against an REP
for the REP's failure to remit timely payments of Transition Charges as set
forth in Section 3.02(c) of this Agreement.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), business trust, limited liability company, unincorporated organization
or government or any agency or political subdivision thereof.
"Proceeding" means any suit in equity, action at law or other judicial or
administrative proceeding.
"Projected Transition Bond Balance" means, as of any date, the anticipated
Outstanding Amount of Series [ ] Transition Bonds after giving effect to payment
of the sum of the amounts provided for in the Expected Amortization Schedules
for the Series [ ] Transition Bonds and such date.
"Provider of Last Resort" has the meaning specified in Section 39.106 of
the Texas Electric Choice Plan.
"PUCT" means the Public Utility Commission of Texas or any successor entity
thereto.
"PUCT Regulations" means any regulations, rules, orders or directives
promulgated, issued or adopted by the PUCT.
"Qualified Costs" has the meaning assigned to that term in the Texas
Electric Choice Plan and the Financing Order.
"Rating Agency" means any rating agency rating the Series [ ] Transition
Bonds at the time of issuance at the request of the Issuer, which initially
shall be ▇▇▇▇▇'▇, Fitch and Standard & Poor's. If no such organization or
successor is any longer in existence, "Rating Agency" shall be a nationally
recognized statistical rating organization or other comparable Person designated
by the Issuer, written notice of which designation shall be given to the
Trustee, the PUCT and the Servicer.
"Rating Agency Condition" means, with respect to any action, the
notification in writing to each Rating Agency of such action, and confirmation
from S&P and Fitch to the Trustee and the Issuer that such action will not
result in a reduction or withdrawal of the then current rating by such Rating
Agency of the Series [ ] Transition Bonds.
"Redemption Date" means, with respect to the Series [ ] Transition Bonds
or, if applicable, each Tranche thereof, the date for the redemption of the
Transition Bonds of such Series or Tranche pursuant to Sections 10.01 or 10.02
of the Indenture or the Series Supplement for such Series or Tranche, which in
each case shall be a Payment Date.
"Released Parties" has the meaning specified in Section 5.02(f) of the
Servicing Agreement.
14
"REP" means a retail electric provider under the Financing Order.
"REP Billing Day" has the meaning specified in Section 3.02(c) of the
Servicing Agreement.
"REP Default" has the meaning specified in Section 9(c) of the Issuer
Annex.
"REP Deposit" has the meaning specified in Section 8 of the Issuer Annex.
"Required Capital Amount" means a capital contribution in an amount equal
to the amount specified in the Series Supplement, representing a capital
contribution from CenterPoint Houston.
"Responsible Officer" means, with respect to the Trustee, any officer
within the Corporate Trust Office of the Trustee, including any Vice President,
Director, Managing Officer, associate, Assistant Vice President, Secretary,
Assistant Secretary, or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also, with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject.
"Retiring Trustee" means a Trustee that resigns or vacates the office of
Trustee for any reason.
"Sale Agreement" means the Transition Property Sale Agreement dated as of [
] relating to the Transition Property, between the Seller and the Issuer, as the
same may be amended and supplemented from time to time.
"Sale Date" means the date on which the Seller sells, transfers, assigns
and conveys the Transition Property to which this Agreement relates to the
Issuer.
"Schedule TC2" means the tariff on the form entitled "Schedule TC2"
approved by the PUCT in the Financing Order and filed by CenterPoint Houston
prior to the issuance of any Transition Bonds.
"Seller" means CenterPoint Houston, or its successor, in its capacity as
seller of the Transition Property to the Issuer pursuant to the Sale Agreement.
"[Semiannual] Servicer's Certificate" means the statement prepared by the
Servicer and delivered to the Trustee with respect to the Series [ ] Transition
Bonds on or prior to each Payment Date therefor, the form of which is attached
to the Indenture as Schedule 1.
"Series" means the Series [ ] of Transition Bonds issued by the Issuer and
authenticated by the Trustee pursuant to the Indenture, as specified in the
Series Supplement.
"Series Issuance Date" means the date on which the Series [ ] are to be
originally issued in accordance with the Indenture and the Series Supplement.
15
"Series Supplement" means the indenture supplemental to the Indenture that
authorizes the Series [ ] Transition Bonds.
"Series Trust Estate" has the meaning specified in the Series Supplement.
"Servicer" means CenterPoint Houston, as the servicer of the Transition
Property, and each successor to or assignee of CenterPoint Houston (in the same
capacity) pursuant to Section 5.03, 5.04, or 6.04 of the Servicing Agreement.
"Servicer Default" means an event specified in Section 6.01 of the
Servicing Agreement.
"Servicing Agreement" means the Transition Property Servicing Agreement
dated as of [ ], between the Issuer and the Servicer, and acknowledged by the
Trustee, relating to the Series [ ] Transition Property as the same may be
amended and supplemented from time to time.
"Servicing Fee" means the fee payable by the Issuer to the Servicer on each
Payment Date with respect to the Series [ ] Transition Bonds in an amount
specified in Section 5.07 of the Servicing Agreement.
"Standard & Poor's" or "S&P" means Standard & Poor's, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, or any successor thereto.
"State" means any one of the 50 states of the United States of America or
the District of Columbia.
"Successor Servicer" means a successor Servicer appointed by the Trustee
pursuant to Section 6.04 of the Servicing Agreement which will succeed to all
the rights and duties of the Servicer under the Servicing Agreement.
"TC Collections" means amounts constituting good funds collected by any
Person in respect of Transition Charges and Transition Property.
"Termination Notice" has the meaning specified in Section 6.01 of the
Servicing Agreement.
"Texas Electric Choice Plan" means the Act of May 21, 1999, 76th Leg. R.S.
ch. 405, 1999 (codified at Texas Utilities Code Section 39.001 et seq.).
"Tranche" means any one of the tranches of Series [ ] Transition Bonds, as
specified in the Series Supplement.
"Transition Bond" means any of the Series [ ] Transition Bonds issued by
the Issuer pursuant to the Indenture.
16
"Transition Bond Balance" means, as of any date, the aggregate Outstanding
Amount of Series [ ] Transition Bonds on such date.
"Transition Bond Owner" means, with respect to a Book-Entry Transition
Bond, the Person who is the beneficial owner of such Book-Entry Transition Bond,
as reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly as a Clearing Agency
Participant or as an indirect participant, in each case in accordance with the
rules of such Clearing Agency).
"Transition Bond Register" has the meaning specified in Section 2.05 of the
Indenture.
"Transition Bond Registrar" means the Trustee, in its capacity as keeper of
the Transition Bond Register, or any successor to the Trustee in such capacity.
"Transition Charge Adjustment" means each adjustment to Transition Charges
related to the Transition Property made in accordance with Section 4.01 of the
Servicing Agreement and the Issuer Annex or in connection with the redemption or
refunding by the Issuer of Transition Bonds.
"Transition Charges" means the nonbypassable amounts to be charged for the
use or availability of electric services, approved by the PUCT in the Financing
Order to recover Qualified Costs, that shall be collected by CenterPoint
Houston, its successors, assignees or other collection agents as provided for in
the Financing Order.
"Transition Property" means the rights and interests of Seller or its
successor under the Financing Order, once those rights are first transferred to
the Issuer or pledged in connection with the issuance of the Transition Bonds,
including the right to impose, collect and receive through Transition Charges
payable by retail electric customers within Seller's certificated service area
as it existed on May 1, 1999, an amount sufficient to cover the Qualified Costs
of the Seller authorized in the Financing Order, the right to receive Transition
Charges in amounts and at times sufficient to pay principal and interest and
make other deposits in connection with the Transition Bonds and all revenues and
collections resulting from Transition Charges.
"Transition Property Documentation" means all documents relating to the
Transition Property, including copies of the Financing Order and all documents
filed with the PUCT in connection with any Transition Charges Adjustment, as
described in Section 3.08 of the Servicing Agreement.
"Trustee" means ____________________________________, a _________ banking
corporation, as trustee, or its successor or any successor Trustee under the
Indenture.
"UCC" means, unless the context otherwise requires, the Uniform Commercial
Code, as in effect in the relevant jurisdiction, as amended from time to time.
"Underwriting Agreement" has the meaning specified in the Indenture.
"Utility" has the meaning specified in the Intercreditor Agreement.
17