EXHIBIT 10.3
FORM OF SERVICING AGREEMENT
INTANGIBLE TRANSITION PROPERTY SERVICING AGREEMENT
between
COMED FUNDING, LLC
Grantee
and
COMMONWEALTH EDISON COMPANY,
Servicer
Dated as of DECEMBER __, 1998
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01. DEFINITIONS. . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. OTHER DEFINITIONAL PROVISIONS. . . . . . . . . . . 4
ARTICLE II
APPOINTMENT AND AUTHORIZATION . . . . . . . . . . . . . . . . . . 4
SECTION 2.01. APPOINTMENT OF SERVICER; ACCEPTANCE OF APPOINTMENT 4
SECTION 2.02. AUTHORIZATION. . . . . . . . . . . . . . . . . . . 5
SECTION 2.03. DOMINION AND CONTROL OVER THE INTANGIBLE TRANSITION
PROPERTY . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
BILLING SERVICES . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3.01. DUTIES OF SERVICER.. . . . . . . . . . . . . . . . 6
SECTION 3.02. SERVICING AND MAINTENANCE STANDARDS. . . . . . . . 9
SECTION 3.03. CERTIFICATE OF COMPLIANCE. . . . . . . . . . . . . 10
SECTION 3.04. ANNUAL REPORT BY INDEPENDENT PUBLIC ACCOUNTANTS. . 10
ARTICLE IV
SERVICES RELATED TO RECONCILIATION ADJUSTMENTS AND TRUE-UP
ADJUSTMENTS AND MONITORING OF THIRD-PARTY COLLECTORS 12
SECTION 4.01. RECONCILIATION ADJUSTMENTS AND TRUE-UP ADJUSTMENTS 12
SECTION 4.02. LIMITATION OF LIABILITY. . . . . . . . . . . . . . 17
SECTION 4.03 MONITORING OF THIRD-PARTY COLLECTORS . . . . . . . 18
ARTICLE V
THE INTANGIBLE TRANSITION PROPERTY . . . . . . . . . . . . . . . 23
SECTION 5.01. CUSTODY OF INTANGIBLE TRANSITION PROPERTY RECORDS. 23
SECTION 5.02. DUTIES OF SERVICER AS CUSTODIAN. . . . . . . . . . 23
SECTION 5.03. INSTRUCTIONS; AUTHORITY TO ACT . . . . . . . . . . 26
SECTION 5.04. CUSTODIAN'S INDEMNIFICATION. . . . . . . . . . . . 26
SECTION 5.05. EFFECTIVE PERIOD AND TERMINATION . . . . . . . . . 27
SECTION 5.06. GENERAL INDEMNIFICATION OF INDENTURE TRUSTEE AND
DELAWARE TRUSTEE . . . . . . . . . . . . . . . . . 27
ARTICLE VI
THE SERVICER . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 6.01. REPRESENTATIONS AND WARRANTIES OF SERVICER . . . . 28
SECTION 6.02. INDEMNITIES OF SERVICER; RELEASE OF CLAIMS . . . . 31
SECTION 6.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, SERVICER . . . . . . . . . . . . . 32
SECTION 6.04. LIMITATION ON LIABILITY OF SERVICER AND OTHERS . . 33
SECTION 6.05. COMED NOT TO RESIGN AS SERVICER. . . . . . . . . . 34
SECTION 6.06. SERVICING COMPENSATION . . . . . . . . . . . . . . 35
SECTION 6.07. COMPLIANCE WITH APPLICABLE LAW . . . . . . . . . . 36
SECTION 6.08. ACCESS TO CERTAIN RECORDS AND INFORMATION REGARDING
INTANGIBLE TRANSITION PROPERTY . . . . . . . . . . 36
SECTION 6.09. APPOINTMENTS . . . . . . . . . . . . . . . . . . . 36
SECTION 6.10. NO SERVICER ADVANCES . . . . . . . . . . . . . . . 37
SECTION 6.11. REMITTANCES. . . . . . . . . . . . . . . . . . . . 37
SECTION 6.12 COMPLIANCE WITH SERVICING STANDARD; CHANGES IN ICC
TARIFFS. . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VII
DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 7.01. SERVICER DEFAULT . . . . . . . . . . . . . . . . . 40
SECTION 7.02. APPOINTMENT OF SUCCESSOR . . . . . . . . . . . . . 42
SECTION 7.03. WAIVER OF PAST DEFAULTS. . . . . . . . . . . . . . 43
SECTION 7.04. NOTICE OF SERVICER DEFAULT . . . . . . . . . . . . 43
ARTICLE VIII
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . 43
SECTION 8.01. AMENDMENT . . . . . . . . . . . . . . . . . . . . . 44
SECTION 8.02. MAINTENANCE OF RECORDS . . . . . . . . . . . . . . 45
SECTION 8.03. NOTICES. . . . . . . . . . . . . . . . . . . . . . 45
SECTION 8.04. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . 46
SECTION 8.05. LIMITATIONS ON RIGHTS OF OTHERS. . . . . . . . . . 46
SECTION 8.06. SEVERABILITY. . . . . . . . . . . . . . . . . . . . 47
SECTION 8.07. SEPARATE COUNTERPARTS . . . . . . . . . . . . . . . 47
SECTION 8.08. HEADINGS. . . . . . . . . . . . . . . . . . . . . . 47
SECTION 8.09. GOVERNING LAW . . . . . . . . . . . . . . . . . . . 47
SECTION 8.10. ASSIGNMENTS TO NOTE ISSUER AND INDENTURE TRUSTEE. . 47
SECTION 8.11. NONPETITION COVENANTS . . . . . . . . . . . . . . . 48
SECTION 8.12. LIMITATION OF LIABILITY . . . . . . . . . . . . . . 48
EXHIBITS AND SCHEDULES
Exhibit A Form of Monthly Servicer's Certificate
Exhibit B Form of Certificate of Compliance
Exhibit C Form of Amendatory Tariff
Exhibit D Form of Quarterly Servicer's Certificate
Schedule 4.01(a) Expected Amortization Schedule
ii
Schedule 6.01(f) No Proceedings
ANNEXES
Annex I Servicing Procedures
Schedule 6 to
Annex I Calculation of Aggregate Remittance Amount
iii
INTANGIBLE TRANSITION PROPERTY SERVICING AGREEMENT dated as of December
__, 1998, between COMED FUNDING LLC, a Delaware limited liability company
(the "Grantee"), and COMMONWEALTH EDISON COMPANY, an Illinois corporation, as
Servicer (the "Servicer").
RECITALS
A. Pursuant to the Funding Law and the 1998 Transitional Funding Order,
the Grantee and the Note Issuer are concurrently entering into the Sale
Agreement, pursuant to which the Grantee is selling the 1998 Intangible
Transition Property to the Note Issuer, and the Grantee may sell Subsequent
Intangible Transition Property to the Note Issuer pursuant to Subsequent Sale
Agreements.
B. In connection with its ownership of the Intangible Transition Property
and in order to collect the IFCs, the Grantee desires to engage the Servicer to
carry out the functions described herein. The Servicer currently performs
similar functions for itself with respect to its own charges to its customers
and may in the future perform such functions for others. In addition, the
Grantee desires to engage the Servicer to act on its behalf in making
Reconciliation Adjustments and True-Up Adjustments. The Servicer desires to
perform all of these activities on behalf of the Grantee.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. (a) Capitalized terms used herein and not
otherwise defined herein have the meanings assigned to them in that certain
Indenture (including Appendix A thereto) dated as of the date hereof between the
Note Issuer and ▇▇▇▇▇▇ Trust and Savings Bank,
as the Indenture Trustee, as the same may be amended, supplemented or
otherwise modified from time to time (the "INDENTURE").
(b) Whenever used in this Agreement, the following words and phrases shall
have the following meanings:
"AGREEMENT" means this Intangible Transition Property Servicing
Agreement, together with all Exhibits, Schedules, Annexes and Attachments
hereto, as the same may be amended, supplemented and otherwise modified from
time to time.
"ALTERNATIVE REMITTANCE REQUIREMENT" means, with respect to any
Third-Party Collector, that such Third-Party Collector is obligated to remit
payments more frequently than under the Fifteen-Day Remittance Option or the
Seven-Day Remittance Option.
"ANNUAL ACCOUNTANT'S REPORT" has the meaning set forth in Section 3.04.
"AMENDATORY TARIFF" means an amendment to any Tariff substantially in
the form of Exhibit C.
"CERTIFICATE OF COMPLIANCE" has the meaning set forth in Section 3.03.
"COLLECTIONS CURVES" means the Monthly Collections Curves.
"DAILY REMITTANCE" has the meaning set forth in Section 6.11(a).
"FIFTEEN-DAY REMITTANCE OPTION" means, with respect to any Third-Party
Collector, the option set forth in the 1998 Initial Tariff (or any similar
option set forth in any Subsequent Tariff) to remit IFCS to the Servicer
(whether or not collected from Customers) within fifteen days of billing by
the Servicer.
"IFC CUSTOMER CLASS" has the meaning set forth in Annex I.
"INTANGIBLE TRANSITION PROPERTY RECORDS" has the meaning assigned to
that term in Section 5.01.
2
"LOSSES" has the meaning assigned to that term in Section 5.04.
"MONTHLY COLLECTIONS CURVES" means the models used by the Servicer to
calculate collection amounts for each Billing Period pursuant to SCHEDULE 6 to
Annex I hereto, as such models may be modified from time to time in accordance
with this Agreement.
"MONTHLY SERVICER'S CERTIFICATE" has the meaning assigned to that term in
Section 3.01(b)(i).
"OFFICER'S CERTIFICATE" means a certificate signed by a Responsible
Officer.
"RETIREMENT OF THE NOTES" means the day on which the final distribution is
made to the Indenture Trustee in respect of the last Outstanding Notes.
"SERVICER DEFAULT" has the meaning assigned to that term in Section 7.01.
"SERVICING STANDARD" means the obligation of the Servicer to calculate,
collect, apply, remit and reconcile proceeds of the Intangible Transition
Property, including IFC Payments, and all other Note Collateral for the benefit
of the Note Issuer and the Holders (i) with the same degree of care and
diligence as the Servicer applies with respect to payments owed to it for its
own account, (ii) in accordance with all applicable procedures and requirements
established by the ICC for collection of electric utility tariffs and (iii) in
accordance with the other terms of this Agreement.
"SEVEN-DAY REMITTANCE OPTION" means, with respect to any Third-Party
Collector, the option set forth in the 1998 Initial Tariff (or any similar
option set forth in any Subsequent Tariff) to remit IFC Payments to the Servicer
within seven days of such Third-Party Collector's receipt from Customers.
"TERMINATION NOTICE" has the meaning assigned to that term in Section 7.01.
"THIRD-PARTY COLLECTOR" means each third-party, including each Applicable
ARES, which, pursuant to any Tariff, any other Tariffs filed with the ICC, or
any agreement with ComEd, is obligated to remit IFCs or IFC Payments to the
Servicer.
SECTION 1.02. OTHER DEFINITIONAL PROVISIONS.
(a) Non-capitalized terms used herein which are defined in the Public
Utilities Act shall, as the context requires, have the meanings assigned to
such terms in the Public Utilities Act, but without giving effect to
amendments to the Public Utilities Act after the date hereof which have a
material adverse effect on the Note Issuer or the Holders.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant
hereto unless otherwise defined therein.
(c) The words "hereof," "herein," "hereunder" and words of similar
import, when used in this Agreement, shall refer to this Agreement as a whole
and not to any particular provision of this Agreement; Section, Schedule,
Exhibit, Annex and Attachment references contained in this Agreement are
references to Sections, Schedules, Exhibits, Annexes and Attachments in or to
this Agreement unless otherwise specified; and the term "including" shall
mean "including without limitation."
(d) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter forms of
4
such terms.
ARTICLE II
APPOINTMENT AND AUTHORIZATION
SECTION 2.01. APPOINTMENT OF SERVICER; ACCEPTANCE OF APPOINTMENT.
Subject to Section 6.05 and Article 7, the Grantee appoints the Servicer, and
the Servicer accepts such appointment, to perform the Servicer's obligations
pursuant to this Agreement on behalf of and for the benefit of the Grantee or
any assignee thereof in accordance with the terms of this Agreement and
applicable law. This appointment and the Servicer's acceptance thereof may
not be revoked except in accordance with the express terms of this Agreement.
SECTION 2.02. AUTHORIZATION. With respect to all or any portion of the
Intangible Transition Property, the Servicer shall be and is authorized and
empowered by the Grantee to (a) execute and deliver, on behalf of itself
and/or the Grantee, as the case may be, any and all instruments, documents or
notices, and (b) on behalf of itself and/or the Grantee, as the case may be,
make any filing and participate in proceedings of any kind with any
governmental authorities, including with the ICC. The Grantee shall furnish
the Servicer with such documents as have been prepared by the Servicer for
execution by the Grantee, and with such other documents as may be in the
Grantee's possession, as necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties hereunder. Upon the
Servicer's written request, the Grantee shall furnish the Servicer with any
powers of attorney or other documents necessary or appropriate to enable the
Servicer to carry out its duties hereunder.
SECTION 2.03. DOMINION AND CONTROL OVER THE INTANGIBLE TRANSITION
PROPERTY. Notwithstanding any other provision herein, the Grantee shall have
dominion and control over the Intangible Transition Property, and the
Servicer, in accordance with the terms hereof, is acting
5
solely as the servicing agent and custodian for the Grantee with respect to
the Intangible Transition Property and the Intangible Transition Property
Records. The Servicer shall not take any action that is not authorized by
this Agreement, that is not consistent with its customary procedures and
practices, or that shall impair the rights of the Grantee in the Intangible
Transition Property, in each case unless such action is required by
applicable law.
ARTICLE III
BILLING SERVICES
SECTION 3.01. DUTIES OF SERVICER. The Servicer, as agent for the
Grantee, shall have the following duties:
(a) DUTIES OF SERVICER GENERALLY. The Servicer's duties in general
shall include management, servicing and administration of the Intangible
Transition Property (including maintaining records of the cumulative total
of IFCs and verifying that such amount has not exceeded the dollar amount
of Intangible Transition Property established by the ICC pursuant to a
Funding Order); on or before the date of issuance of any Series of Notes,
filing with the ICC the filing required by Section 18-107(c)(1) of the
Funding Laws to perfect the lien of the Indenture Trustee in the Intangible
Transition Property; making such filings and initiating such proceedings
with the ICC as may be required to ensure that the dollar amount of
Intangible Transition Property authorized by the Funding Orders is adequate
for the payment in full of all principal and interest on the Notes;
obtaining meter reads, calculating usage, billing, collections and posting
of all payments in respect of the Intangible Transition Property;
responding to inquiries by Customers, the ICC or any federal, local or
6
other state governmental authorities with respect to the Intangible
Transition Property; delivering Bills to Customers and ARES,
investigating and handling delinquencies, processing and depositing
collections and making periodic remittances; furnishing periodic reports
to the Grantee, the Note Issuer, the Indenture Trustee and the Rating
Agencies; and taking all necessary action in connection with
Reconciliation Adjustments and True-Up Adjustments as set forth herein.
Certain of the duties set forth above may be performed by ARES pursuant
to ARES Service Agreements. The Servicer shall be allowed to perform
its duties hereunder either directly or by or through agents, attorneys,
custodians, nominees or (with prior written notice to the Rating
Agencies) by delegating all or a portion of its duties to any
third-parties; provided, however, that, notwithstanding any such
delegation of duties, the Servicer shall remain liable for the
performance of all of its duties and obligations pursuant to the terms
of this Agreement and the other Basic Documents and such delegation
shall not relieve the Servicer of its liability and responsibility with
respect to such duties or obligations. The fees and expenses of any
such persons to whom the Servicer may delegate duties shall be as agreed
between the Servicer and such third parties from time to time, and,
except for such fees and expenses which are expressly reimbursable
hereunder, such third-party fees and expenses shall be payable solely by
the Servicer out of its Servicing Fee and neither the Grantee nor any
assignee thereof shall have any responsibility therefor. Anything to
the contrary notwithstanding, the duties of the Servicer set forth in
this Agreement shall be qualified in their entirety by any ICC
Regulations as in effect at the time such duties are to be performed.
Without limiting the generality of this Section 3.01(a), in furtherance
of the foregoing, the Servicer shall also have, and shall comply with,
the duties and
7
responsibilities relating to data acquisition, usage and
▇▇▇▇ calculation, billing, customer service functions, collections,
payment processing and remittance set forth in Annex I hereto, including
without limitation payment of all Allocable IFC Revenue Amounts
described therein.
(b) REPORTING FUNCTIONS.
(i) MONTHLY SERVICER'S CERTIFICATE. On or before the 20th
calendar day of each month (or, if such date is not a Servicer
Business Day, the immediately preceding Servicer Business Day), the
Servicer shall prepare and deliver to the Grantee, the Note Issuer,
the Indenture Trustee and the Rating Agencies a written report
substantially in the form of EXHIBIT A hereto (a "Monthly Servicer's
Certificate") setting forth certain information relating to IFC
Payments received by the Servicer during the Collection Period
immediately preceding such Monthly Remittance Date.
(ii) NOTIFICATION OF LAWS AND REGULATIONS. The Servicer shall
immediately notify the Grantee, the Note Issuer, the Indenture Trustee
and the Rating Agencies in writing of any laws or ICC Regulations
hereafter promulgated that have a material adverse effect on the
Servicer's ability to perform its duties under this Agreement.
(iii) OTHER INFORMATION. Upon the reasonable request of the
Grantee, the Note Issuer, the Indenture Trustee or any Rating Agency,
the Servicer shall provide to the Grantee, the Note Issuer, Indenture
Trustee or the Rating Agencies, as the case may be, any public
financial information in respect of the Servicer, or any material
information regarding the Intangible Transition Property to the extent
it is reasonably available to the Servicer, as may be reasonably
necessary and
8
permitted by law, to enable the Grantee, the Note Issuer, the
Indenture Trustee or the Rating Agencies to monitor the Servicer's
performance hereunder. In addition, so long as any of the Notes of
any Series are outstanding, the Servicer shall provide the Grantee,
the Note Issuer and the Indenture Trustee, within a reasonable time
after written request therefor, any information available to the
Servicer or reasonably obtainable by it that is necessary to
calculate the IFCs applicable to each class of Customer.
(iv) PREPARATION OF REPORTS TO BE FILED WITH THE SEC. The
Servicer shall prepare any reports required to be filed by the Grantee
or the Note Issuer under the securities laws, including a copy of each
Quarterly Servicer's Certificate described in Section 4.01(c)(ii), the
annual Certificate of Compliance described in Section 3.03, and the
Annual Accountant's Report described in Section 3.04.
SECTION 3.02. SERVICING AND MAINTENANCE STANDARDS. On behalf of the
Grantee, the Servicer shall (i) manage, service, administer and make collections
in respect of the Intangible Transition Property with reasonable care and in
accordance with the Servicing Standard and applicable law, including all
applicable ICC Regulations and guidelines, using the same degree of care and
diligence that the Servicer exercises with respect to similar assets for its own
account and, if applicable, for others; (ii) follow customary standards,
policies and procedures for the industry in performing its duties as Servicer;
(iii) use all reasonable efforts, consistent with its customary servicing
procedures, to enforce, and maintain rights in respect of, the Intangible
Transition Property; (iv) comply with all laws and regulations applicable to and
binding on it relating to the Intangible Transition Property, and (v) make all
required submissions and provide all required notifications to the ICC with
respect to any Adjustments. The Servicer shall be responsible for the
imposition, collection and remittance of
9
IFCs in accordance with Annex I hereto, the inclusion of IFCs in all Bills,
and the deduction of IFCs from tariffed charges and all other charges from
which the IFCs are to be deducted and stated separately, including, without
limitation, all charges under any contracts with Customers who would, but for
such contract, be paying Applicable Rates. 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 Intangible Transition
Property, which, in the Servicer's judgment, may include the taking of legal
action. Without limiting the foregoing, if the Servicer determines at any
time that the aggregate dollar amount of IFCS to be imposed is reasonably
likely to exceed the maximum dollar amount of Intangible Transition Property
authorized by the 1998 Transitional Funding Order and any Subsequent Funding
Orders to be imposed and collected and any Notes remain outstanding, the
Servicer shall make a good faith effort to take any and all subsequent
regulatory action with the ICC to obtain an order expressly authorizing a
larger dollar amount of Intangible Transition Property in an amount
sufficient to pay such Notes in full.
SECTION 3.03. CERTIFICATE OF COMPLIANCE. The Servicer shall deliver to
the Grantee, the Note Issuer, the Indenture Trustee and the Rating Agencies on
or before [INSERT APPROPRIATE MONTH AND DAY] of each year, commencing [INSERT
DATE FIRST REPORT IS DUE] to and including the [INSERT APPROPRIATE MONTH AND
DAY] succeeding the Retirement of the Notes, an Officer's Certificate
substantially in the form of EXHIBIT B hereto (a "Certificate of Compliance"),
stating that: (i) a review of the activities of the Servicer during the twelve
months ended the preceding [INSERT DATE AS OF WHICH REPORT WILL BE PREPARED]
(or, in the case of the first Certificate of Compliance to be delivered on or
before _____________, 199_, the period of time from the date of this Agreement
until [FIRST DATE AS OF WHICH REPORT WILL BE PREPARED]) and of its performance
under this Agreement has been made under such officer's supervision, and (ii) to
such officer's
10
knowledge, based on such review, the Servicer has fulfilled all of its
obligations in all material respects under this Agreement throughout such
twelve months (or, in the case of the Certificate of Compliance to be
delivered on or before [DATE OF FIRST CERTIFICATE] the period of time from
the date of this Agreement until [FIRST DATE AS OF WHICH REPORT WILL BE
PREPARED]), or, if there has been a default in the fulfillment of any such
material obligation, specifying each such material default known to such
officer and the nature and status thereof.
SECTION 3.04. ANNUAL REPORT BY INDEPENDENT PUBLIC ACCOUNTANTS. (a)
The Servicer, at its own expense in consideration of the Servicing Fee paid
to it, shall cause a firm of independent certified public accountants (which
may provide other services to the Servicer or ComEd) to prepare, and the
Servicer shall deliver to the Grantee, the Note Issuer, the Indenture Trustee
and the Rating Agencies a report addressed to the Servicer (the "Annual
Accountant's Report"), which may be included as part of the Servicer's
customary auditing activities, for the information and use of the Grantee,
the Note Issuer, the Indenture Trustee and the Rating Agencies, on or before
[_______________] of each year, beginning [_____________, 199_] to and
including the [_____________]succeeding the Retirement of the Notes, to the
effect that such firm has performed certain procedures in connection with the
Servicer's compliance with its obligations under this Agreement during the
preceding twelve months ended [________] (or, in the case of the first Annual
Accountant's Report to be delivered on or before [_____________, 199_], the
period of time from the date of this Agreement until _________, 199_),
identifying the results of such procedures and including any exceptions
noted. If such accounting firm requires the Indenture Trustee to agree or
consent to the procedures performed by such firm, the Grantee shall direct
the Note Issuer to direct the Indenture Trustee in writing to so agree; it
being understood and agreed that the Indenture Trustee will deliver such
letter of agreement or consent in conclusive reliance upon the direction of
the Note Issuer, and the Indenture Trustee will not make
11
any independent inquiry or investigation as to, and shall have no obligation
or liability in respect of the sufficiency, validity or correctness of such
procedures.
(b) The Annual Accountant's Report shall also indicate that the
accounting firm providing such report is independent of the Servicer within
the meaning of the Code of Professional Ethics of the American Institute of
Certified Public Accountants.
SECTION 3.05 OBLIGATIONS. The Servicer acknowledges and agrees that,
to the fullest extent permitted by applicable law, its obligations under
this Agreement shall remain in effect notwithstanding any breach of the State
Pledge, whether or not contested, or subsequent invalidation of the Funding
Law or any Funding Order and/or any tariff or tariffs filed in connection
therewith, and that no such breach of the State Pledge or invalidation shall
act to excuse the Servicer from liability for any failure to perform its
covenants hereunder, including but not limited to its obligations to remit
IFCs and equivalent amounts for the benefits of the Holders, on account of
any legal inability stemming from such breach of the State Pledge or
invalidation.
ARTICLE IV
SERVICES RELATED TO RECONCILIATION ADJUSTMENTS AND TRUE-UP ADJUSTMENTS AND
MONITORING OF THIRD-PARTY COLLECTORS
SECTION 4.01. RECONCILIATION ADJUSTMENTS AND TRUE-UP ADJUSTMENTS. From
time to time, until the Retirement of the Notes, the Servicer shall identify the
need for Reconciliation Adjustments and True-Up Adjustments and shall take all
reasonable action to obtain and implement such Reconciliation Adjustments and
True-Up Adjustments, all in accordance with the following:
(a) EXPECTED AMORTIZATION SCHEDULE. The initial Expected Amortization
Schedule is attached hereto as SCHEDULE 4.01(a). In connection with the
Note Issuer's issuance of
12
any additional Series of Notes after the Closing Date, the Servicer, on
or prior to the Series Issuance Date therefor, shall revise the Expected
Amortization Schedule to add the requisite information for each new
Series of Notes and set forth, as of each Payment Date through the
scheduled Retirement of the Notes, the aggregate principal amounts of
the Notes of all Series, including such additional Series, expected to
be outstanding on such Payment Date. The Servicer shall also, in
accordance with the requirements (if any) set forth in any Series
Supplement or Trustee's Issuance Certificate and otherwise in a manner
reasonably acceptable to the Grantee, revise the Expected Amortization
Schedule to reflect any required prepayments on account of the receipt
of Allocable IFC Revenue Amounts or any other required or permitted
prepayments affecting such schedule. If the Expected Amortization
Schedule is revised as set forth above, the Servicer shall send a copy
of such revised Expected Amortization Schedule to the Grantee, the Note
Issuer, the Indenture Trustee and the Rating Agencies promptly
thereafter.
(b) RECONCILIATION AND TRUE-UP ADJUSTMENTS (1)
(i) RECONCILIATION ADJUSTMENTS AND FILINGS. Each year within
the two-week period preceding each Reconciliation Adjustment Date, the
Servicer shall: (A) update the data and assumptions underlying the
calculation of the IFCs, including forecasted revenue from Applicable
Rates for each class of Customers, projected electricity usage during
the next Calculation Period for each such class and including interest
and estimated expenses and fees of the Grantee and the Note
------------------
(1) These provisions may need to be revised after the amortization of the
Notes (quarterly vs. semi-annually) has been determined. We have assumed
that reconciliations will be performed semi-annually, in June and December
(commencing June 1999), and true-up determinations will be performed
semi-annually, in March and September (commencing September 1999).
13
Issuer to be paid during such period, the rate of delinquencies and
write-offs, and the Monthly Collections Curves; (B) determine the
Required Debt Service and Debt Service Billing Requirement for the
next Calculation Period based on such updated data and assumptions;
(C) determine the IFCs to be allocated to each class of Customers
during the next Calculation Period based on such Debt Service
Billing Requirement and the terms of the applicable Funding Orders
and the Tariffs filed pursuant thereto (including, without
limitation, the terms requiring that if the forecasted revenues
from Applicable Rates for IFC Customer Class are projected to be
less than the IFCS allocated to that class, the deficiency will be
ratably allocated to other IFC Customer Classes); (D) make all
required notice and other filings with the ICC to reflect the
revised IFCs, including any Amendatory Tariffs required under
Section 18-104(k) of the Funding Law if the resulting IFCs for any
class of Customer will exceed an amount per kilowatt-hour greater
than the amount per kilowatt-hour authorized for such class of
Customer in the applicable Funding Order, and (E) take all
reasonable actions and make all reasonable efforts to effect such
Reconciliation Adjustment and to enforce the provisions of the
Funding Law which limit the ICC's authority to suspend the
effectiveness of any such Amendatory Tariff.
(ii) TRUE-UP ADJUSTMENTS AND FILINGS. Each year immediately
before each March 31 and September 30, commencing September 30, 1999,
the Servicer shall compare the Principal Balance, as of the most
recent Payment Date and after giving effect to payments made on such
Payment Date, to the Projected Principal Balance as of such Payment
Date. If the Servicer determines that such Principal Balance equals
or exceeds 105% of such Projected Principal Balance, then the
14
Servicer shall: (A) update the data and assumptions underlying the
calculation of the IFCs, including forecasted revenue from
Applicable Rates for each class of Customers, projected electricity
usage during the next Calculation Period for each such class and
including interest and estimated expenses and fees of the Grantee
and the Note Issuer to be paid during such period, the rate of
delinquencies and write-offs, and the Monthly Collections Curves;
(B) determine the Required Debt Service and Debt Service Billing
Requirement for the next Calculation Period based on such updated
data and assumptions; (C) determine the IFCs to be allocated to
each class of Customers during the next Calculation Period based
on such Debt Service Billing Requirement and the terms of the
applicable Funding Orders and the Tariffs filed pursuant thereto
(including, without limitation, the terms requiring that if the
forecasted revenues from Applicable Rates for IFC Customer Class
are projected to be less than the IFCs allocated to that class, the
deficiency will be ratably allocated to other IFC Customer
Classes); (D) make all required notice and other filings with the
ICC to reflect the revised IFCs, including any Amendatory Tariffs
required under Section 18-104(k) of the Funding Law if the
resulting IFCs for any class of Customer will exceed an amount per
kilowatt-hour greater than the amount per kilowatt-hour authorized
for such class of Customer in the applicable Funding Order, and (E)
take all reasonable actions and make all reasonable efforts to
effect such True-Up Adjustment and to enforce the provisions of the
Funding Law which limit the ICC's authority to suspend the
effectiveness go any such Amendatory Tariff.
(iii) In the case of any Reconciliation Adjustment or True-Up
15
Adjustment, the Servicer shall implement the revised IFCs, if any, as
of the first Business Day of the following calendar month (e.g.,
January 1 for a Reconciliation Adjustment determined in December, July
1 for a Reconciliation Adjustment determined in June, April 1 for a
True-Up Adjustment determined in March and October 1 for a True-Up
Adjustment determined in September).
(c) REPORTS.
(i) NOTIFICATION OF AMENDATORY TARIFF FILINGS AND RECONCILIATION
AND TRUE-UP ADJUSTMENTS. Whenever the Servicer files an Amendatory
Tariff with the ICC or implements revised IFCs with notice to the ICC
but without filing a Amendatory Tariff as contemplated by any
applicable Funding Order, the Servicer shall send a copy of such
filing or notice (together with a copy of all notices and documents
which, in the Servicer's reasonable judgment, are material to the
adjustments effected by such Amendatory Tariff or notice) to the
Grantee, the Note Issuer, the Indenture Trustee and the Rating
Agencies concurrently therewith.
(ii) QUARTERLY SERVICER'S CERTIFICATE. Not later than five
Servicer Business Days prior to each Payment Date, the Servicer shall
deliver a written report substantially in the form of EXHIBIT D hereto
(the "Quarterly Servicer's Certificate") to the Grantee, the Note
Issuer, the Indenture Trustee and the Rating Agencies.
(iii) REPORTS TO CUSTOMERS. (A) After each revised IFC has gone
into effect pursuant to a Reconciliation Adjustment or a True-Up
Adjustment, the Servicer shall, to the extent and in the manner and
time frame required by applicable ICC Regulations, if any, cause to be
prepared and delivered to
16
Customers any required notices announcing such revised IFCs.
(B) In addition, at least once each year, the Servicer shall (to
the extent that it does not include the notice described below in the
Bills regularly sent to Customers) cause to be prepared and delivered
to Customers a notice stating, in effect, that the IFCs are owned by
the Grantee or any assignee thereof and not ComEd. Such notice shall
be included either as an insert to or in the text of the Bills
delivered to such Customers or shall be delivered to Customers by
electronic means or such other means as the Servicer or the Applicable
ARES may from time to time use to communicate with their respective
customers.
(C) Except to the extent that applicable ICC Regulations make
the Applicable ARES responsible for such costs, or the Applicable ARES
has otherwise agreed to pay such costs, the Servicer shall pay from
its own funds all costs of preparation and delivery incurred in
connection with clauses (A) and (B) above, including but not limited
to printing and postage costs as the same may increase or decrease
from time to time.
(iv) ARES REPORTS. The Servicer shall provide to the Rating
Agencies, upon request, any publicly available reports filed by the
Servicer with the ICC (or otherwise made publicly available by the
Servicer) relating to ARES and any other non-confidential and
non-proprietary information relating to ARES reasonably requested
by the Rating Agencies.
SECTION 4.02. LIMITATION OF LIABILITY. (a) The Grantee and the Servicer
expressly agree and acknowledge that:
(i) In connection with any Reconciliation Adjustment or True-Up
Adjustment, the Servicer is acting solely in its capacity as the servicing
agent hereunder.
17
(ii) Neither the Servicer nor the Grantee shall be responsible in any
manner for, and shall have no liability whatsoever as a result of, any
action, decision, ruling or other determination made or not made, or any
delay (other than any delay resulting from the Servicer's failure to file
the Amendatory Tariffs required by Section 4.01 in a timely and correct
manner or other breach by the Servicer of its duties under this Agreement),
by the ICC in any way related to the Intangible Transition Property or in
connection with any Reconciliation Adjustment or True-Up Adjustment, the
subject of any filings under Section 4.01, any proposed Reconciliation
Adjustment or True-Up Adjustment, or the approval of any revised IFCs.
(iii) The Servicer shall have no liability whatsoever relating to
the calculation of any revised IFCs, including as a result of any
inaccuracy of any of the assumptions made in such calculation regarding
expected energy usage volume and the rate of delinquencies and write-offs,
so long as the Servicer has acted in good faith and has not acted in a
grossly negligent manner in connection therewith, nor shall the Servicer
have any liability whatsoever as a result of any Person, including the
Holders, not receiving any payment, amount or return anticipated or
expected or in respect of any Note generally, except only to the extent
that the same is caused by the Servicer's gross negligence, willful
misconduct, bad faith, or reckless disregard of its obligations and duties
under this Agreement.
(b) Notwithstanding the foregoing, this Section 4.02 shall not relieve the
Servicer of liability for any misrepresentation by the Servicer under Section
6.01 or for any breach by the Servicer of its other obligations under this
Agreement.
SECTION 4.03 MONITORING OF THIRD-PARTY COLLECTORS. From time to time,
until the Retirement of the Notes, the Servicer shall, in accordance with the
Servicing Standard,
18
implement such procedures and policies as are necessary to ensure that the
obligations of all Third-Party Collectors to remit IFCs or IFC Payments are
properly enforced in accordance with the terms and provisions of the Tariffs,
and any other applicable ICC Regulations in effect from time to time. Such
procedures and policies shall include the following:
(a) MAINTENANCE OF RECORDS AND INFORMATION. In addition to any
actions required by ICC Regulations or other applicable law, the Servicer
shall:
(i) maintain adequate records for promptly identifying and
contacting each such Third-Party Collector (including any ARES)
and for monitoring whether such Third-Party Collector is subject
to the Seven-Day Remittance Option, the Fifteen-Day Remittance
Option, or the Alternative Remittance Requirement;
(ii) maintain records of end-user Customers which are billed
by Third-Party Collectors to permit prompt reversion to
dual-billing in the event of default by a Third-Party Collector;
(iii) create and periodically update a record of the current
short-term and long-term unsecured debt ratings, if any, of each
Third-Party Collector which is responsible for billing IFCs directly
to end-user Customers and is obligated to remit IFCS whether or not
IFC payments are actually collected from end-user Customers (and,
where the IFC payment obligations of any such Third-Party Collector
are guaranteed by another entity, the ratings of such other entity);
(iv) create and periodically update, for each Third-Party
Collector which is responsible for billing IFCs directly to end-user
19
Customers and has elected the Fifteen-Day Remittance Option
or is otherwise obligated to remit IFCs whether or not IFC
Payments are actually collected from end-user Customers,
estimates of one month's estimated IFC Collections and, in the
case of any such Third-Party Collector which does not have an
unsecured debt rating of at least BBB- or the equivalent,
maintain a deposit or comparable credit security equal to such
one month's estimated IFC Collections as provided in the Tariffs.
The Servicer shall update the records described in clauses (iii) and (iv)
above no less frequently than (A) monthly in the case of any such
Third-Party Collector with expected monthly IFC ▇▇▇▇▇▇▇▇ of greater than
or equal to $5,000,000 and (B) quarterly in each other case.
(b) MONITORING OF PERFORMANCE AND PAYMENT. In addition to any actions
required by ICC Regulations or other applicable law, the Servicer shall
undertake to do the following:
(i) The Servicer shall require each Third-Party Collector
which has elected the Fifteen-Day Remittance Option or is
otherwise obligated to remit IFCs whether or not IFC Payments are
actually collected from end-user Customers to pay all undisputed
and disputed IFCs billed to such Third-Party Collector, in
accordance with the provisions of the 1998 Initial Tariff and
each Subsequent Tariff. The Servicer shall monitor payment
compliance for each Third-Party Collector which has elected the
Fifteen-Day Remittance Option or otherwise obligated to remit
IFCs whether or not IFC payments are
20
actually collected from end-user Customers.
(ii) The Servicer shall, for each Third-Party Collector
which is responsible for billing IFCs directly to end-user
Customers and has elected the Seven-Day Remittance Option or is
otherwise liable to remit IFC Payments only to the extent
actually received from end-user Customers, compare (x) actual IFC
Collections from such Third-Party Collector to (y) estimated IFC
Collections therefrom. Such comparisons shall be made no less
frequently than :
(A) Every five Servicer Business Days, in the case of
any such Third-Party Collector with expected monthly IFC
▇▇▇▇▇▇▇▇ of greater than or equal to $5,000,000;
(B) Monthly in the case of any such Third-Party
Collector with expected monthly IFC ▇▇▇▇▇▇▇▇ of less than
$5,000,000 but greater than or equal to $1,000,000; and
(C) Quarterly in each other case.
If the discrepancy between actual IFC Collections and estimated IFC
Collections from any such Third-Party Collector, in the reasonable judgment
of the Servicer based upon historical experience and any other information
reasonably available thereto, indicates an actual or impending default in
such Third-Party Collector's remittance of IFC Collections, the Servicer
shall promptly notify such Third-Party Collector in an attempt to determine
the source of discrepancy. If, following such notice, the source of any
material discrepancy cannot be identified, the Servicer shall, in
accordance with ICC Regulations and other applicable law and the Servicing
Standard, take such steps as it reasonably determines are necessary to
21
verify whether or not the applicable Third-Party Collector is in default.
(iii) The Servicer shall, consistent with its customary
billing practices, ▇▇▇▇ each Third-Party Collector who provides
consolidated billing to end-user Customers for all IFCs owed by such
end-user Customers in accordance with the billing cycle otherwise
applicable to such end-user Customers.
(c) ENFORCEMENT. The Servicer shall, in accordance with the terms of
the 1998 Initial Tariff and each Subsequent Tariff, ensure that each
Third-Party Collector remits the undisputed portions of the IFCs or IFC
Payments which it is obligated to remit to the Servicer and remits payment
of the disputed amount under protest (or make some other suitable and
agreeable financial arrangements) pending a hearing on the matter. In the
event of any default by any Third-Party Collector, the Servicer shall
enforce all rights set forth in, and take all other steps permitted by, the
1998 Initial Tariff or any Subsequent Tariff or other ICC Regulations as it
determines, in accordance with the Servicing Standard, are reasonably
necessary to ensure the prompt payment of IFCs by such Third-Party
Collector and to preserve the rights of the Holders with respect thereto,
including, where appropriate, terminating the right of any Third-Party
Collector to ▇▇▇▇ and collect IFCs or petitioning the ICC to impose such
other remedies or penalties as may be available under the circumstances.
In the event any disputed IFCs billed are resolved in favor of a
Third-Party Collector and the Servicer becomes liable for the payment of
interest in respect of IFCs paid under protest or any other penalty, the
Servicer agrees that it will pay such interest or penalty from the
Servicing Fee paid to it or its other funds and shall not deduct such
interest or penalty amounts from IFC
22
Collections.
(d) CREDIT AND COLLECTION POLICIES.
(i) The Servicer shall, to the full extent permitted under the
1998 Funding Order or any Subsequent Funding Order, as applicable,
impose such terms with respect to credit and collection policies
applicable to Third-Party Collectors as may be reasonably necessary to
prevent the then current rating of the Notes from being downgraded.
The Servicer shall, in accordance with and to the extent permitted by
Section 16-118(b) of the Public Utilities Act and the terms of the
1998 Funding Order and any Subsequent Funding Order, include and
impose the above-described terms in all tariffs filed under Section
16-118(b) of the Public Utilities Act which would allow ARES or other
utilities to issue single bills to ComEd's Customers for services
provided by such ARES or other utility and services provided by ComEd.
The Servicer shall periodically review the need for modified or
additional terms based upon, among other things, (i) the relative
amount of IFC Payments received through Third-Party Collectors
relative to the Debt Service Billing Requirement, (ii) the historical
payment and default experience of each ARES and (iii) such other
credit and collection policies to which the ARES are subject, and will
set out any such modified or additional terms in a supplemental tariff
filed with the ICC.
23
ARTICLE V
THE INTANGIBLE TRANSITION PROPERTY
SECTION 5.01. CUSTODY OF INTANGIBLE TRANSITION PROPERTY RECORDS. To
assure uniform quality in servicing the Intangible Transition Property and to
reduce administrative costs, the Grantee revocably appoints the Servicer, and
the Servicer accepts such appointment, to act as the agent of the Grantee, the
Note Issuer and the Indenture Trustee as custodian of any and all documents and
records that the Grantee shall keep on file, in accordance with its customary
procedures, relating to the Intangible Transition Property, including copies of
each Funding Order and all Tariffs relating thereto, and all documents filed
with the ICC in connection with any Reconciliation Adjustment or True-Up
Adjustment (collectively, the "Intangible Transition Property Records"), which
are hereby constructively delivered to the Note Issuer, as transferee of the
Grantee (or, in the case of the Subsequent Intangible Transition Property, will
as of the applicable Subsequent Sale Date be constructively delivered to the
Note Issuer, as transferee of the Grantee) with respect to all Intangible
Transition Property.
SECTION 5.02. DUTIES OF SERVICER AS CUSTODIAN. (a) SAFEKEEPING. The
Servicer shall hold the Intangible Transition Property Records on behalf of the
Grantee, the Note Issuer and the Indenture Trustee, and maintain such accurate
and complete accounts, records and computer systems pertaining to the Intangible
Transition Property Records as shall enable the Grantee to comply with this
Agreement and the Sale Agreement, and as shall enable the Note Issuer to comply
with the Sale Agreement and the Indenture. Except with respect to the
commingling of IFC Collections expressly permitted hereunder, the Servicer shall
keep all of the Intangible Transition Property separate and apart from its other
assets, and shall maintain records with respect to the Intangible Transition
Property (including all IFC Collections) in a manner that facilitates the
identification and segregation of such assets from those of the
24
Servicer. The Servicer shall, in accordance with the remittance
procedures described in Annex I hereto, maintain records sufficient to permit
the IFC Collections to be accounted for separately from the funds with which
they may be commingled, so that the dollar amounts of IFC Collections
commingled with the Servicer's funds may be properly identified and traced.
In performing its duties as custodian the Servicer shall act with reasonable
care, using that degree of care and diligence that the Servicer exercises
with respect to comparable assets that the Servicer services for itself or,
if applicable, for others. The Servicer shall promptly report to the
Grantee, the Note Issuer, the Indenture Trustee and the Rating Agencies any
failure on its part to hold the Intangible Transition Property Records and
maintain its accounts, records and computer systems as herein provided and
promptly take appropriate action to remedy any such failure. Nothing herein
shall be deemed to require an initial review or any periodic review by the
Grantee, the Note Issuer or the Indenture Trustee of the Intangible
Transition Property Records. The Servicer's duties to hold the Intangible
Transition Property Records on behalf of the Grantee, the Note Issuer and the
Indenture Trustee set forth in this Section 5.02, to the extent such
Intangible Transition Property Records have not been previously transferred
to a successor Servicer pursuant to Article VII, shall terminate three years
after the earlier of the date on which (i) the Servicer is succeeded by a
successor Servicer in accordance with Article VII hereof and (ii) no Notes of
any Series are Outstanding.
(b) MAINTENANCE OF AND ACCESS TO RECORDS. The Servicer shall maintain the
Intangible Transition Property Records at [10 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, 37th Floor] or at such other office as shall be specified to the
Grantee, the Note Issuer and the Indenture Trustee by written notice at least 30
days prior to any change in location. The Servicer shall permit the Grantee,
the Note Issuer and the Indenture Trustee or their respective duly authorized
representatives, attorneys or auditors to inspect, audit and make copies of and
abstracts from the
25
Servicer's records regarding the Intangible Transition
Property and the IFCs (including all the Intangible Transition Property
Records), at such times during normal business hours as the Grantee, the Note
Issuer or the Indenture Trustee shall reasonably request and which do not
unreasonably interfere with the Servicer's normal operations. Nothing in this
Section 5.02(b) shall affect the obligation of the Servicer to observe any
applicable law (including any ICC Regulations) prohibiting disclosure of
information regarding the Customers, and the failure of the Servicer to provide
access to such information as a result of such obligation shall not constitute a
breach of this Section 5.02(b).
(c) DEFENDING INTANGIBLE TRANSITION PROPERTY AGAINST CLAIMS. The Servicer
shall institute any action or proceeding necessary to compel performance by the
ICC or the State of Illinois of any of their obligations or duties under the
Funding Law, any Funding Order or any Tariff, and the Servicer agrees to take
such legal or administrative actions, including defending against or instituting
and pursuing legal actions and appearing or testifying at hearings or similar
proceedings, as may be necessary to block or overturn any attempts to cause a
repeal of, modification of or supplement to or judicial invalidation of the
Amendatory Act or any Funding Order or the rights of holders of Intangible
Transition Property that would be adverse to the Grantee, the Note Issuer or any
Holders. The Servicer shall continue to impose IFCs (or equivalent amounts),
collect IFCs (or equivalent amounts), and remit IFCs (or equivalent amounts), in
accordance with this Agreement and to ensure that the IFCs (or equivalent
amounts) are deducted from ComEd's Applicable Rates and other charges in
accordance with the Basic Documents continuing until the Retirement of the
Notes, in each such case unless expressly prohibited
26
by law or by any court or regulatory order in effect at such time. The
Servicer shall advance its own funds in order to institute any actions or
proceedings described above, PROVIDED, however, that the costs of any such
action or proceeding shall be payable from IFC Collections as an Operating
Expense in accordance with the priorities set forth in Section 8.02(d) of the
Indenture. The Servicer's obligations pursuant to this Section 5.02 shall
survive and continue notwithstanding the fact that the payment of Operating
Expenses pursuant to Section 8.02(d) of the Indenture may be delayed (it
being understood that the Servicer may be required to advance its own funds
to satisfy its obligations hereunder).
SECTION 5.03. INSTRUCTIONS; AUTHORITY TO ACT. For so long as any Notes
remain Outstanding, the Servicer shall be deemed to have received proper
instructions with respect to the Intangible Transition Property Records upon its
receipt of written instructions signed by a Responsible Officer of the
Indenture Trustee.
SECTION 5.04. CUSTODIAN'S INDEMNIFICATION. The Servicer as custodian
shall indemnify the Grantee, the Note Issuer, the Delaware Trustee, the
Indenture Trustee and the Holders and each of their respective officers,
directors, employees and agents for, and defend and hold harmless each such
Person from and against, any and all liabilities, obligations, losses, damages,
payments and claims, and reasonable costs or expenses, of any kind whatsoever
(collectively, "Losses") that may be imposed on, incurred by or asserted against
any such Person as the result of any improper act or omission in any way
relating to the maintenance and custody by the Servicer, as custodian, of the
Intangible Transition Property Records; PROVIDED, HOWEVER, that the Servicer
shall not be liable for any portion of any such amount resulting from the
willful misconduct, bad faith or gross negligence of the Grantee, the Note
Issuer, the Delaware Trustee, the Indenture Trustee or any Holders.
Indemnification under this Section shall survive resignation or removal
of the Indenture
27
Trustee or the Delaware Trustee and shall include reasonable out-of-pocket
fees and expenses of investigation and litigation.
SECTION 5.05. EFFECTIVE PERIOD AND TERMINATION. The Servicer's
appointment as custodian shall become effective as of the Closing Date and shall
continue in full force and effect until terminated pursuant to this Section. If
any Servicer shall resign as Servicer in accordance with the provisions of this
Agreement or if all of the rights and obligations of any Servicer shall have
been terminated under Section 7.01, the appointment of such Servicer as
custodian shall be terminated by the Indenture Trustee or by the Holders of
Notes evidencing not less than twenty-five percent (25%) of the Outstanding
Amount of the Notes of all Series in the same manner as the Indenture Trustee or
such Holders may terminate the rights and obligations of the Servicer under
Section 7.01.
SECTION 5.06. GENERAL INDEMNIFICATION OF INDENTURE TRUSTEE AND DELAWARE
TRUSTEE. The Servicer agrees to indemnify and hold harmless the Indenture
Trustee and the Delaware Trustee and their respective directors, officers,
employees and agents from and against any and all Losses incurred by or asserted
against any such Person as a result of or in connection with the transactions
contemplated by this Agreement or any other Basic Document, other than any Loss
incurred by reason or result of the gross negligence or willful misconduct of
the Indenture Trustee or the Delaware Trustee; PROVIDED, HOWEVER, that the
foregoing indemnity is extended to the Indenture Trustee and the Delaware
Trustee solely in their respective capacities as trustees and not for the
benefit of the Holders or any other Person. The obligations of the Servicer set
forth herein shall survive the termination of this Agreement or the earlier
resignation or removal of the Indenture Trustee under the Indenture or the
Delaware Trustee under the Trust Agreement.
28
ARTICLE VI
THE SERVICER
SECTION 6.01. REPRESENTATIONS AND WARRANTIES OF SERVICER. The Servicer
makes the following representations and warranties, as of the Closing Date, as
of each Subsequent Sale Date relating to the sale of Subsequent Intangible
Transition Property pursuant to a Subsequent Sale Agreement, and as of such
other dates as expressly provided in this Section 6.01, on which the Grantee is
deemed to have relied in entering into this Agreement. The representations and
warranties shall survive the execution and delivery of this Agreement, the
transfer of this Agreement to the Note Issuer pursuant to the Sale Agreement and
the pledge thereof to the Indenture Trustee pursuant to the Indenture.
(a) ORGANIZATION AND GOOD STANDING. The Servicer is duly organized
and validly existing as a corporation in good standing under the laws of
the state of its incorporation, with the power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is presently conducted, and had at all relevant
times, and has, the requisite power, authority and legal right to service
the Intangible Transition Property and to hold the Intangible Transition
Property Records as custodian.
(b) DUE QUALIFICATION. The Servicer is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business (including the servicing
of the Intangible Transition Property as required by this Agreement) shall
require such qualifications, licenses or approvals (except where the
failure to so qualify would not be reasonably likely to have a material
adverse
29
effect on the Servicer's business, operations, assets, revenues or
properties or adversely affect the servicing of the Intangible Transition
Property).
(c) POWER AND AUTHORITY. The Servicer has the requisite power and
authority to execute and deliver this Agreement and to carry out its terms;
and the execution, delivery and performance of this Agreement have been
duly authorized by the Servicer by all necessary corporate action.
(d) BINDING OBLIGATION. This Agreement constitutes a legal, valid
and binding obligation of the Servicer enforceable in accordance with its
terms, subject to applicable insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws relating to or affecting
creditors' rights generally from time to time in effect and to general
principles of equity (including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing), regardless of
whether considered in a proceeding in equity or at law.
(e) NO VIOLATION. The consummation of the transactions contemplated
by this Agreement and the fulfillment of the terms hereof do not (i)
conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time) a default under,
the articles of incorporation or bylaws of the Servicer, or any indenture,
agreement or other instrument to which the Servicer is a party or by which
it shall be bound; (ii) result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any such indenture,
agreement or other instrument; or (iii) violate any law or any order, rule
or regulation applicable to the Servicer of any court or of any Federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or its properties.
(f) NO PROCEEDINGS. There are no proceedings or investigations
30
pending or, to the Servicer's knowledge, threatened before any court,
Federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or its
properties involving or relating to the Servicer or the Grantee or, to the
Servicer's knowledge, any other Person: (i) asserting the invalidity of
this Agreement, or any of the other Basic Documents or the Notes, (ii)
seeking to prevent the issuance of the Notes or the consummation of any of
the transactions contemplated by this Agreement or any of the other Basic
Documents, (iii) seeking any determination or ruling that could reasonably
be expected to materially and adversely affect the performance by the
Servicer of its obligations under, or the validity or enforceability of,
this Agreement, any of the other Basic Documents or the Notes, or (iv)
relating to the Servicer and which could reasonably be expected to
adversely affect the Federal or state income tax attributes of the Notes.
(g) APPROVALS. No approval, authorization, consent, order or other
action of, or filing with, any court, Federal or state regulatory body,
administrative agency or other governmental instrumentality is required in
connection with the Servicer's execution and delivery of this Agreement,
the Servicer's performance of the transactions contemplated hereby or the
Servicer's fulfillment of the terms hereof, except those that have been
obtained or made and those that the Servicer is required to make in the
future pursuant to Article IV hereof.
(h) MONTHLY COLLECTIONS CURVES. Each Monthly Collections Curve used
in connection with SCHEDULE 6 to Annex I hereto is accurate in all material
respects, and the future delivery of each revised Monthly Collections Curve
shall constitute a representation and warranty that each such revised
Monthly Collections Curve is accurate in all material respects.
31
(i) ASSUMPTIONS. The assumptions set forth in SCHEDULE 6 to Annex I
hereto are reasonable and made in good faith, and will be reasonable and
made in good faith as they change from time to time.
(j) REPORTS AND CERTIFICATES. Each report and certificate delivered
in connection with a Tariff will constitute a representation and warranty
by the Servicer that each such report or certificate, as the case may be,
is true and correct; PROVIDED, HOWEVER, that to the extent any such report
or certificate is based in part upon or contains assumptions, forecasts or
other predictions of future events, the representation and warranty of the
Servicer with respect thereto will be limited to the representation and
warranty that such assumptions, forecasts or other predictions of future
events are reasonable based upon historical performance.
SECTION 6.02. INDEMNITIES OF SERVICER; RELEASE OF CLAIMS. (a) The Servicer
shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Servicer under this Agreement.
(b) The Servicer shall indemnify the Grantee, the Note Issuer, the
Indenture Trustee, the Delaware Trustee and the Holders and each of their
respective officers, directors, employees and agents for, and defend and hold
harmless each such Person from and against, any and all Losses that may be
imposed on, incurred by or asserted against any such Person as a result of (i)
the Servicer's willful misconduct, bad faith or gross negligence in the
performance of its duties or observance of its covenants under this Agreement or
its reckless disregard of its obligations and duties under this Agreement, or
(ii) the Servicer's breach of any of its representations or warranties in this
Agreement.
(c) For purposes of Section 6.02(b), in the event of the termination of
the rights and obligations of ComEd (or any successor thereto pursuant to
Section 6.03) as Servicer pursuant to
32
Section 7.01, or a resignation by such Servicer pursuant to this Agreement,
such Servicer shall be deemed to be the Servicer pending appointment of a
successor Servicer pursuant to Section 7.02.
(d) Indemnification under this Section 6.02 shall survive any repeal of,
modification of, supplement to, or judicial invalidation of, the Funding Law or
any Funding Order, shall survive the resignation or removal of the Indenture
Trustee or the Delaware Trustee or the termination of this Agreement and shall
include reasonable out-of-pocket fees and expenses of investigation and
litigation (including reasonable attorneys' fees and expenses).
(e) Except to the extent expressly provided in this Agreement or the other
Basic Documents (including, without limitation, the Servicer's claims with
respect to the Servicing Fee, reimbursement for any Excess Remittance,
reimbursement for costs incurred pursuant to Section 5.12(d) and the payment of
the consideration for any grant of Intangible Transition Property to the
Grantee), the Servicer releases and discharges the Grantee, the Note Issuer, the
Delaware Trustee and the Indenture Trustee and each of their respective
officers, directors and agents (collectively, the "Released Parties") from any
and all actions, claims and demands whatsoever, whenever arising, which the
Servicer, in its capacity as Servicer or otherwise, shall or may have against
any such Person relating to the Intangible Transition Property or the Servicer's
activities with respect thereto other than any actions, claims and demands
arising out of the willful misconduct, bad faith or gross negligence of the
Released Parties.
SECTION 6.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS
OF, SERVICER. Any Person (a) into which the Servicer may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Servicer shall be a party or (c) which may succeed to the properties and assets
of the Servicer substantially as a whole, or, with respect to its obligations as
Servicer, which Person in any of the foregoing cases executes an agreement of
33
assumption to perform every obligation of the Servicer hereunder, shall be the
successor to the Servicer under this Agreement without further act on the part
of any of the parties to this Agreement; PROVIDED, HOWEVER, that (i) immediately
after giving effect to such transaction, no Servicer Default and no event which,
after notice or lapse of time, or both, would become a Servicer Default shall
have occurred and be continuing, (ii) the Servicer shall have delivered to the
Grantee, the Note Issuer, the Indenture Trustee and the Rating Agencies an
Officers' Certificate and an Opinion of Counsel each stating that such
consolidation, merger or succession and such agreement of assumption complies
with this Section and that all conditions precedent provided for in this
Agreement relating to such transaction have been complied with and (iii) the
Servicer shall have delivered to the Grantee, the Note Issuer, the Indenture
Trustee and the Rating Agencies an Opinion of Counsel either (A) stating that,
in the opinion of such counsel, all filings to be made by the Servicer,
including filings with the ICC pursuant to the Funding Law, have been executed
and filed that are necessary to preserve and protect fully the interests of the
Grantee in the Intangible Transition Property and reciting the details of such
filings or (B) stating that, in the opinion of such counsel, no such action
shall be necessary to preserve and protect such interests. Notwithstanding
anything herein to the contrary, the execution of the foregoing agreement of
assumption and compliance with clauses (i), (ii) and (iii) above shall be
conditions to the consummation of the transactions referred to in clauses (a),
(b) or (c) above.
SECTION 6.04. LIMITATION ON LIABILITY OF SERVICER AND OTHERS. Neither the
Servicer nor any of the directors or officers or employees or agents of the
Servicer shall be liable to the Grantee, the Note Issuer, the Indenture Trustee,
the Delaware Trustee, the Holders or any other Person, except as provided under
this Agreement, for any action taken or for refraining from the taking of any
action pursuant to this Agreement or for errors in judgment; PROVIDED, HOWEVER,
that this provision shall not protect the Servicer or any such person against
any liability that would
34
otherwise be imposed by reason of willful misconduct, bad faith or gross
negligence in the performance of the Servicer's duties or by reason of
reckless disregard of the Servicer's obligations and duties. The Servicer and
any director or officer or employee or agent of the Servicer may rely in good
faith on the advice of counsel reasonably acceptable to the Indenture Trustee
or on any document of any kind, PRIMA FACIE properly executed and submitted
by any Person, respecting any matters arising under this Agreement.
SECTION 6.05. COMED NOT TO RESIGN AS SERVICER. Subject to the provisions
of Sections 6.03, ComEd shall not resign from the obligations and duties hereby
imposed on it as Servicer under this Agreement unless either (a) the Servicer
determines that the performance of its duties under this Agreement shall no
longer be permissible under applicable law (disregarding any breach of the State
Pledge that is being contested or subsequent invalidation of the Funding Law,
any Funding Order and/or any Tariff or Tariffs filed in connection therewith),
or (b) the Rating Agency Condition shall have been satisfied and, in either such
case, to the extent required under any Funding Order, the ICC shall have
approved such resignation. Notice of any such determination permitting ComEd's
resignation shall be given to the Grantee, the Note Issuer, the Indenture
Trustee and the Rating Agencies at the earliest practicable time (and, if such
communication is not in writing, shall be confirmed in writing at the earliest
practicable time) and any such determination shall be evidenced by an Opinion of
Counsel to such effect delivered to the Grantee, the Note Issuer and the
Indenture Trustee concurrently with or promptly after such notice. No such
resignation shall become effective until a successor Servicer
35
shall have assumed ComEd's responsibilities and obligations in accordance
with Section 7.02.
SECTION 6.06. SERVICING COMPENSATION. (a) In consideration for its
services hereunder, until the Retirement of the Notes, the Servicer shall
receive a fee (the "Servicing Fee") quarterly on each Payment Date in an amount
equal to (i) $750,000 for so long as IFCs are billed concurrently with charges
otherwise billed to Customers or (ii) $5,000,000 if IFCs are not billed
concurrently with charges otherwise billed to Customers but, instead, are
billed separately to Customers. The Servicer shall also be entitled to retain
as additional compensation (i) any interest earnings on IFC Payments received by
the Servicer and invested by the Servicer pursuant to Section 6(d) of Annex I
hereto during each Collection Period prior to remittance to the Collection
Account and (ii) all late payment charges, if any, collected from Customers or
ARES. So long as the Servicer is billing Customers for charges for electric
service or any Applicable Rates, the Servicer will ▇▇▇▇ IFCs to such Customers
concurrently with such other charges and such Applicable Rates.
(b) The Servicer shall receive, in accordance with Section 8.02 of the
Indenture, the Servicing Fee set forth in Section 6.06(a) above on each Payment
Date in accordance with the priorities set forth in Section 8.02(d) of the
Indenture, by wire transfer of immediately-available funds from the Collection
Account to an account designated by the Servicer. Any portion of the Servicing
Fee not paid on such date shall be added to the Servicing Fee payable on the
subsequent Payment Date.
(c) Except as provided in Section 5.02(c), the Servicer shall be required
to pay from its own account all expenses incurred by it in connection with its
activities hereunder (including any fees to and disbursements by accountants,
counsel, or any other Person, any taxes imposed on the Servicer and any expenses
incurred in connection with reports to Holders) out of the compensation retained
by or paid to it pursuant to this Section 6.06, and shall not be entitled to
36
any extra payment or reimbursement therefor.
SECTION 6.07. COMPLIANCE WITH APPLICABLE LAW. The Servicer covenants and
agrees, in servicing the Intangible Transition Property, to comply with all laws
applicable to, and binding upon, the Servicer and relating to such Intangible
Transition Property the noncompliance with which would have a material adverse
effect on the value of the Intangible Transition Property; PROVIDED, HOWEVER,
that the foregoing is not intended to, and shall not, impose any liability on
the Servicer for noncompliance with any law that the Servicer is contesting in
good faith in accordance with its customary standards and procedures.
SECTION 6.08. ACCESS TO CERTAIN RECORDS AND INFORMATION REGARDING
INTANGIBLE TRANSITION PROPERTY. The Servicer shall provide to the Grantee, the
Note Issuer, the Indenture Trustee and the Holders access to the Intangible
Transition Property Records in such cases where the Grantee, the Note Issuer,
the Indenture Trustee and the Holders shall be required by applicable law to be
provided access to such records. Access shall be afforded without charge, but
only upon reasonable request and during normal business hours at the offices of
the Servicer. Nothing in this Section shall affect the Servicer's obligation to
observe any applicable law (including any ICC Regulation) prohibiting disclosure
of information regarding the Customers, and the failure of the Servicer to
provide access to such information as a result of such obligation shall not
constitute a breach of this Section.
SECTION 6.09. APPOINTMENTS. The Servicer may at any time appoint any
Person to perform all or any portion of its obligations as Servicer
hereunder; PROVIDED, HOWEVER, that, unless such person is Unicom Corporation
or a wholly-owned subsidiary thereof, the Rating Agency Condition shall have
been satisfied in connection therewith; PROVIDED FURTHER that the Servicer
shall remain obligated and be liable to the Grantee, the Note Issuer, the
Indenture Trustee and the Holders for the servicing and administering of the
Intangible Transition Property in accordance
37
with the provisions hereof without diminution of such obligation and
liability by virtue of the appointment of such Person and to the same extent
and under the same terms and conditions as if the Servicer alone were
servicing and administering the Intangible Transition Property; and PROVIDED
FURTHER, HOWEVER, that nothing herein (including, without limitation, the
Rating Agency Condition) shall preclude the execution by the Servicer of an
ARES Service Agreement with any ARES pursuant to applicable ICC Regulations.
The fees and expenses of such Person shall be as agreed between the Servicer
and such Person from time to time and none of the Grantee, the Note Issuer,
the Indenture Trustee, the Holders or any other Person shall have any
responsibility therefor or right or claim thereto. No such appointment shall
constitute a Servicer resignation under Section 6.05.
SECTION 6.10. NO SERVICER ADVANCES. The Servicer shall not make any
advances of interest or principal on the Notes.
SECTION 6.11. REMITTANCES. (a) Subject to clause (b) below, on each
Servicer Business Day, the Servicer shall remit to the General Subaccount of
the Collection Account the total IFC payments estimated to have been received by
the Servicer from or on behalf of Customers on the second preceding Servicer
Business Day in respect of all previously Billed IFCS (the "Daily Remittance"),
which Daily Remittance may be calculated according to the procedures set forth
in Annex I. Prior to each remittance to the General Subaccount of the
Collection Account pursuant to this Section, the Servicer shall provide written
notice to the Indenture Trustee of each such remittance (including the exact
dollar amount to be remitted).
(b) Notwithstanding the foregoing clause (a), unless a Servicer Default
has occurred and is continuing or if the Rating Agency
38
Condition is not satisfied, during any period in which the Servicer
maintains a short-term rating of A-1 or better by Standard & Poor's , P-1 or
better by Moody's, (if rated by Duff & ▇▇▇▇▇▇) D-1 or better by Duff & ▇▇▇▇▇▇
and (if rated by Fitch IBCA) F-1 or better by Fitch IBCA, the Servicer shall
no longer be required to make Daily Remittances and, in lieu thereof, the
Servicer shall, on each Monthly Remittance Date, cause to be made a wire
transfer of immediately-available funds equal to the Aggregate Remittance
Amount for the applicable Collection Period to the General Subaccount of the
Collection Account. On or before each Monthly Remittance Date, commencing
with the Monthly Remittance Date following the end of the [seventh] Billing
Period after the Closing Date, the Servicer shall calculate the amount of any
Remittance Shortfall or Excess Remittance attributable to the prior
Collection Period and (A) if a Remittance Shortfall exists, the Servicer
shall make a supplemental remittance to the General Subaccount of the
Collection Account on such Monthly Remittance Date in the amount of such
Remittance Shortfall, or (B) if an Excess Remittance exists, the Servicer
shall be entitled to take the actions described in clause (d) below.
(c) The Servicer agrees and acknowledges that it holds all IFC Payments
collected by it for the benefit of the Grantee and that all such amounts shall
be remitted by the Servicer in
39
accordance with this Section without any surcharge, fee, offset, charge or
other deduction except (i) as set forth in clause (b) above or clause (d)
below and (ii) for late fees permitted by Section 6.06. The Servicer shall
not make any claim to reduce its obligation to remit all IFC Payments
collected by it in accordance with this Agreement except (i) as set forth in
clause (b) above or clause (d) below and (ii) for late fees permitted by
Section 6.06.
(d) If there is an Excess Remittance, the Servicer shall be entitled
either (i) to reduce the amount of each Daily Remittance which the Servicer
remits to the General Subaccount of the Collection Account (beginning with the
Daily Remittance occurring on such Monthly Remittance Date) for application to
the amount of such Excess Remittance until the balance of such Excess Remittance
has been reduced to zero, the amount of such reduction becoming the property of
the Servicer or (ii) so long as such withdrawal would not cause the amounts on
deposit in the General Subaccount or the Reserve Subaccount to be insufficient
for the payment of the next installment of interest on the Notes, to be paid
immediately from the General Subaccount or the Reserve Subaccount the amount of
such Excess Remittance, such payment becoming the property of the Servicer. If
there is a Remittance Shortfall, the amount which the Servicer remits to the
General Subaccount of the Collection Account on such Monthly Remittance Date
shall be increased by the amount of such Remittance Shortfall, such increase
coming from the Servicer's own funds.
(e) Unless otherwise directed to do so by the Note Issuer, the Servicer
shall be responsible for selecting Eligible Investments in which the funds in
the Collection Account shall be invested pursuant to Section 8.03 of the
Indenture.
SECTION 6.12 COMPLIANCE WITH SERVICING STANDARD; CHANGES IN ICC TARIFFS.
The Servicer shall, with respect to its duties hereunder, comply at all times
with the Servicing Standard, and, so long as any of the Notes are outstanding,
shall not initiate any material changes
40
with respect to its policies and procedures pertaining to credit (including
requirements for deposits from Customers), billing, collections (including
procedures for disconnection of service for non-payment) and restoration of
service after disconnection, and shall not, except as required by applicable
law, initiate any changes in any ICC tariffs relating to the foregoing
matters which are reasonably likely to adversely affect the Servicer's
ability to make timely recovery of amounts billed to Customers.
Notwithstanding the foregoing, the Servicer may, in its own discretion, waive
any late payment charge or any other fee or charge relating to delinquent
payments, if any, and may waive, vary or modify any terms of payment of any
amounts payable by a Customer, in each case, if such waiver or action (a)
would be in accordance with the Servicer's customary practices or those of
any successor Servicer with respect to comparable assets that it services for
itself, (b) would not materially adversely affect the Holders and (c) would
comply with applicable law. In addition, the Servicer may write off any
amounts that it deems uncollectible in accordance with its customary
practices.
ARTICLE VII
DEFAULT
SECTION 7.01. SERVICER DEFAULT. If any one of the following events (a
"Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to deposit in the Collection Account
on behalf of the Grantee any required remittance that shall continue
unremedied for a period of three Business Days after written notice of such
failure is received by the Servicer from the Grantee, the Note Issuer or
the Indenture Trustee or after discovery of such failure by a Responsible
Officer of the Servicer; or
(b) any failure on the part of the Servicer or ComEd, as the case may
be, duly
41
to observe or to perform in any material respect any other covenants or
agreements of the Servicer or ComEd (as the case may be) set forth in
this Agreement (including Section 4.01) or any other Basic Document to
which it is a party, which failure shall (i) materially and adversely
affect the rights of the Holders and (ii) continue unremedied for a
period of 30 days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given (A) to
the Servicer or ComEd (as the case may be) by the Grantee or the Note
Issuer or (B) to the Servicer or ComEd (as the case may be) by the
Indenture Trustee or by the Holders of Notes evidencing not less than
twenty-five percent (25%) of the Outstanding Amount of the Notes of all
Series; or
(c) any representation or warranty made by the Servicer in this
Agreement shall prove to have been incorrect when made, which has a
material adverse effect on the Grantee, the Note Issuer or the Holders and
which material adverse effect continues unremedied for a period of 30 days
after the date on which written notice thereof, requiring the same to be
remedied, shall have been delivered to the Servicer by the Grantee, the
Note Issuer or the Indenture Trustee; or
(d) an Insolvency Event occurs with respect to the Servicer or ComEd;
then, and in each and every case, so long as the Servicer Default shall not have
been remedied, either the Indenture Trustee, or the Holders of Notes evidencing
not less than twenty-five percent (25%) of the Outstanding Amount of the Notes
of all Series, by notice (a "Termination Notice") then given in writing to the
Servicer (and to the Indenture Trustee if given by the Holders) may terminate
all the rights and obligations (other than the obligations set forth in Section
6.02 hereof) of the Servicer under this Agreement. In addition, upon a Servicer
Default described in Section 7.01(a), each of the following shall be entitled to
apply to the ICC for sequestration and payment
42
of revenues arising with respect to the Intangible Transition Property: (1)
the Holders and the Indenture Trustee as beneficiaries of the lien provided
under Section 18-107(c) of the Funding Law; (2) the Grantee or its assignees;
(3) the Note Issuer; or (4) pledgees or transferees of the Intangible
Transition Property. On or after the receipt by the Servicer of a
Termination Notice, all authority and power of the Servicer under this
Agreement, whether with respect to the Notes, the Intangible Transition
Property, the IFCs or otherwise, shall, without further action, pass to and
be vested in such successor Servicer as may be appointed under Section 7.02;
and, without limitation, the Indenture Trustee is authorized and empowered to
execute and deliver, on behalf of the predecessor Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments,
and to do or accomplish all other acts or things necessary or appropriate to
effect the purposes of such Termination Notice, whether to complete the
transfer of the Intangible Transition Property Records and related documents,
or otherwise. The predecessor Servicer shall cooperate with the successor
Servicer, the Grantee, the Note Issuer and the Indenture Trustee in effecting
the termination of the responsibilities and rights of the predecessor
Servicer under this Agreement, including the transfer to the successor
Servicer for administration by it of (i) all cash amounts that shall at the
time be held by the predecessor Servicer for remittance, or shall thereafter
be received by it with respect to the Intangible Transition Property or the
IFCs, and (ii) any and all Intangible Transition Property Records. All
reasonable out-of-pocket costs and expenses (including attorneys' fees and
expenses) incurred in connection with transferring the Intangible Transition
Property Records to the successor Servicer and amending this Agreement to
reflect such succession as Servicer pursuant to this Section shall be paid by
the predecessor Servicer upon presentation of reasonable documentation of
such costs and expenses.
SECTION 7.02. APPOINTMENT OF SUCCESSOR. (a) Upon the Servicer's receipt
of a Termination Notice pursuant to Section 7.01 or the Servicer's resignation
or removal in
43
accordance with the terms of this Agreement, the predecessor Servicer shall
continue to perform its functions as Servicer under this Agreement, and shall
be entitled to receive the requisite Servicing Fee, until a successor
Servicer shall have assumed in writing the obligations of the Servicer
hereunder as described below. In the event of the Servicer's termination
hereunder, the Note Issuer shall appoint a successor Servicer with the
Grantee's prior written consent thereto (which consent shall not be
unreasonably withheld), and the successor Servicer shall accept its
appointment by a written assumption in form acceptable to the Grantee and the
Note Issuer and provide prompt notice of such assumption to the Indenture
Trustee and the Rating Agencies. If within 30 days after the delivery of the
Termination Notice, the Note Issuer shall not have obtained such a new
Servicer, the Indenture Trustee may petition the ICC or a court of competent
jurisdiction to appoint a successor Servicer under this Agreement. A Person
shall qualify as a successor Servicer only if (i) such Person is permitted
under ICC Regulations to perform the duties of the Servicer, (ii) the Rating
Agency Condition shall have been satisfied and (iii) such Person enters into
a servicing agreement with the Grantee having substantially the same
provisions as this Agreement.
(b) Upon appointment, the successor Servicer shall be the successor in all
respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties and liabilities arising thereafter relating thereto
placed on the predecessor Servicer and shall be entitled to the Servicing Fee
and all the rights granted to the predecessor Servicer by the terms and
provisions of this Agreement.
SECTION 7.03. WAIVER OF PAST DEFAULTS. The Holders of Notes evidencing
not less than a majority of the Outstanding Amount of the Notes of all Series
may, on behalf of all Holders, waive in writing any default by the Servicer in
the performance of its obligations hereunder and its consequences, except a
default in making any required deposits to the Collection Account in
44
accordance with this Agreement, which waiver shall require the consent of all
Holders. Upon any such waiver of a past default, such default shall cease to
exist, and any Servicer Default arising therefrom shall be deemed to have
been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent
thereto.
SECTION 7.04. NOTICE OF SERVICER DEFAULT. The Servicer shall deliver to
the Grantee, the Note Issuer, the Indenture Trustee and the Rating Agencies,
promptly after having obtained knowledge thereof, but in no event later than
five Business Days thereafter, written notice in an Officer's Certificate of any
event which with the giving of notice or lapse of time, or both, would become a
Servicer Default under Section 7.01(a) or (b).
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.01. AMENDMENT. (a) This Agreement may be amended in writing by
the Servicer and the Grantee with five Business Days' prior written notice given
to the Rating Agencies and the prior written consent of the Indenture Trustee,
but without the consent of any of the Holders or Holders, to cure any ambiguity,
to correct or supplement any provisions in this Agreement or for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions in this Agreement or of modifying in any manner the rights of the
Holders; PROVIDED, HOWEVER, that such action shall not, as evidenced by an
Officer's Certificate delivered to the Grantee, the Note Issuer, the Delaware
Trustee and the Indenture Trustee, adversely affect in any material respect the
interests of any Holder.
This Agreement may also be amended in writing from time to time by the
Servicer and the Grantee with prior written notice given to the Rating Agencies
and the prior written consent of the Indenture Trustee and the prior written
consent of the Holders of Notes evidencing not less
45
than a majority of the Outstanding Amount of the Notes of all Series, for the
purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement or of modifying in any manner the
rights of the Holders; PROVIDED, HOWEVER, that no such amendment shall (a)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, IFC Collections or (b) reduce the aforesaid percentage of the
Outstanding Amount of the Notes, the Holders of which are required to consent
to any such amendment, without the consent of the Holders of all the
outstanding Notes.
Promptly after the execution of any such amendment and the requisite
consents, the Grantee shall furnish written notification of the substance of
such amendment to the Note Issuer, the Indenture Trustee and each of the Rating
Agencies.
It shall not be necessary for the consent of Holders pursuant to this
Section to approve the particular form of any proposed amendment or consent, but
it shall be sufficient if such consent shall approve the substance thereof.
Prior to its consent to any amendment to this Agreement, the Indenture
Trustee shall be entitled to receive and conclusively rely upon an Opinion of
Counsel stating that such amendment is authorized or permitted by this
Agreement. The Indenture Trustee may, but shall not be obligated to, enter into
any such amendment which affects the Indenture Trustee's own rights, duties,
indemnities or immunities under this Agreement or otherwise.
(b) Notwithstanding Section 8.01(a) or anything to the contrary in this
Agreement, the Servicer and the Grantee may amend Annex I to this Agreement in
writing with prior written notice given to the Indenture Trustee and the Rating
Agencies, but without the consent of the Indenture Trustee, any Rating Agency or
any Holder, solely to address changes to the Servicer's method of calculating
IFC Payments received as a result of changes to the Servicer's current
computerized customer information system, as contemplated by Schedule 6
46
to Annex I hereto; PROVIDED that any such amendment shall not have a material
adverse effect on the Holders.
SECTION 8.02. MAINTENANCE OF RECORDS. The Servicer shall maintain
accounts and records as to the Intangible Transition Property accurately and in
accordance with its standard accounting procedures and in sufficient detail to
permit reconciliation between IFC Payments received by the Servicer and IFC
Collections from time to time deposited in the Collection Account.
SECTION 8.03. NOTICES. All demands, notices and communications upon or to
the Servicer, the Grantee, the Note Issuer, the Indenture Trustee or the Rating
Agencies under this Agreement shall be in writing and personally delivered, sent
by overnight mail or sent by telecopy or other similar form of rapid
transmission, and shall be deemed to have been duly given upon receipt (a) in
the case of the Servicer, to Commonwealth Edison Company, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇; (b) in the case of the Grantee, to
ComEd Funding, LLC, c/o Commonwealth Edison Company, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, (c) in the case of the Note Issuer, to
ComEd Transitional Funding Trust, c/o First Union Trust Company, National
Association, as Delaware Trustee, One ▇▇▇▇▇▇ Square, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: Corporate Trust Administration, (d) in
the case of the Indenture Trustee, at the Corporate Trust office, (e) in the
case of Moody's, to ▇▇▇▇▇'▇ Investors Service, Inc., ABS Monitoring Department,
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, (f) in the case of Standard &
Poor's, to Standard & Poor's Corporation, ▇▇ ▇▇▇▇▇▇▇▇ (▇▇▇▇ ▇▇▇▇▇), ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention of Asset Backed Surveillance Department, (g) in the
case of Fitch IBCA, to Fitch IBCA, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇, Attention ABS Surveillance, or (h) in the case of Duff & ▇▇▇▇▇▇, to ▇▇▇▇
& ▇▇▇▇▇▇ Credit Rating Co., 17
▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: Asset-Backed
Monitoring Group, or as to each of the foregoing, at such other address as
shall be designated by written notice to the other parties.
SECTION 8.04. ASSIGNMENT. Notwithstanding anything to the contrary
contained herein, except as provided in Section 6.03 and as provided in the
provisions of this Agreement concerning the resignation of the Servicer, this
Agreement may not be assigned by the Servicer.
SECTION 8.05. LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of the Servicer and the Grantee and, to the
extent provided herein or in the Basic Documents, the Note Issuer, the Indenture
Trustee and the Holders, and nothing in this Agreement, whether express or
implied, shall be construed to give to any other Person any legal or equitable
right, remedy or claim in the Intangible Transition Property or under or in
respect of this Agreement or any covenants, conditions or provisions contained
herein.
SECTION 8.06. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 8.07. SEPARATE COUNTERPARTS. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 8.08. HEADINGS. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 8.09. GOVERNING LAW. This Agreement shall be construed in
accordance with
48
the laws of the State of Illinois, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
shall be determined in accordance with such laws.
SECTION 8.10. ASSIGNMENTS TO NOTE ISSUER AND INDENTURE TRUSTEE. The
Servicer acknowledges and consents to the assignment of any or all of the
Grantee's rights and obligations hereunder to the Note Issuer pursuant to the
Sale Agreement, and the collateral assignment of any or all of the Note Issuer's
rights and obligations hereunder to the Indenture Trustee pursuant to the
Indenture. The Servicer agrees that the Note Issuer and the Indenture Trustee,
as assignees, shall, subject to the terms of the Basic Documents, have the right
to enforce this Agreement on behalf of the Holders and to exercise directly all
of the Grantee's rights and remedies under this Agreement (including without
limitation, the right to give or withhold any consents or approvals of the
Grantee to be given or withheld hereunder). After the Grantee transfers its
rights and obligations hereunder to the Note Issuer pursuant to the Sale
Agreement, any duty the Servicer owes to the Grantee and the Note Issuer
hereunder shall be fully performed if such duty is performed for the benefit of
the Note Issuer alone. The Note Issuer and the Indenture Trustee on behalf of
the Holders shall all be expressly deemed third-party beneficiaries of this
Agreement.
SECTION 8.11. NONPETITION COVENANTS. Notwithstanding any prior termination
of this Agreement or the Indenture, but subject to the ICC's right to order the
sequestration and payment of revenues arising with respect to the Intangible
Transition Property notwithstanding any bankruptcy, reorganization or other
insolvency proceedings with respect to the debtor, pledgor or transferor of the
Intangible Transition Property pursuant to any applicable Funding Order or other
applicable law, the Servicer shall not, prior to the date which is one year and
one day after the termination of the Indenture, acquiesce, petition or otherwise
invoke or cause the Grantee,
49
the Note Issuer or the Delaware Trustee to invoke or join with them in
provoking the process of any court or governmental authority for the purpose
of commencing or sustaining a case against the Grantee, the Note Issuer or
the Delaware Trustee under any Federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Grantee, the Note
Issuer or the Delaware Trustee or any substantial part of the property of the
Grantee, the Note Issuer or the Delaware Trustee, or ordering the winding up
or liquidation of the affairs of the Grantee, the Note Issuer or the
Delaware Trustee.
SECTION 8.12. LIMITATION OF LIABILITY. It is expressly understood and
agreed by the parties hereto that (a) this Agreement is acknowledged and
accepted by First Union Trust Company, National Association ("First Union"), not
individually or personally but solely as Delaware Trustee on behalf of the Note
Issuer, and by ▇▇▇▇▇▇ Trust and Savings Bank ("▇▇▇▇▇▇"), not individually or
personally but solely as Indenture Trustee on behalf of the Holders, in each
case in the exercise of the powers and authority conferred and vested in it, (b)
the representations, undertakings and agreements herein made by the Delaware
Trustee on behalf of the Note Issuer, and by the Indenture Trustee on behalf of
the Holders, are made and intended not as personal representations, undertakings
and agreements by First Union and ▇▇▇▇▇▇, respectively, but are made and
intended for the purpose of binding only the Note Issuer and the Holders,
respectively, (c) nothing herein contained shall be construed as creating any
liability on First Union or ▇▇▇▇▇▇, individually or personally, to perform any
covenant either expressed or implied contained herein, except in their
respective capacities as Delaware Trustee and Indenture Trustee, all such
liability, if any, being expressly waived by the parties who are signatories to
this Agreement and by any Person claiming by, through or under such parties and
(d) under no circumstances shall First Union or ▇▇▇▇▇▇, be personally liable for
the payment of any indebtedness or expenses of the Note
50
Issuer or the Holders, respectively, or be personally liable for the breach
or failure of any obligation, representation, warranty or covenant made or
undertaken by the Delaware Trustee or the Indenture Trustee, respectively,
under this Agreement; PROVIDED, HOWEVER, that this provision shall not
protect First Union or ▇▇▇▇▇▇ against any liability that would otherwise be
imposed by reason of willful misconduct, bad faith or gross negligence in the
performance of their respective duties under this Agreement.
51
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.
COMED FUNDING, LLC
By:________________________
Name:
Title:
COMMONWEALTH EDISON COMPANY
By:________________________
Name:
Title:
Acknowledged and Accepted:
FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION, not in
its individual capacity but solely as
Delaware Trustee on behalf of
ComEd Transitional Funding Trust
By:______________________
Name:
Title:
▇▇▇▇▇▇ TRUST AND SAVINGS BANK,
not in its individual capacity but solely as
Indenture Trustee
By:______________________
Name:
Title:
52
EXHIBIT 10.3
ANNEX I
TO
SERVICING AGREEMENT
The Servicer agrees to comply with the following servicing procedures:
SECTION 1. DEFINITIONS.
(a) Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Agreement.
(b) Whenever used in this Annex I, the following words and phrases shall
have the following meanings:
"AGGREGATE REMITTANCE AMOUNT" has the meaning set forth in Section
6(e) of this Annex I.
"APPLICABLE MDMA" means with respect to each Customer, the meter data
management agent providing meter reading services for that Customer's account.
"BILLED IFCS" means the amounts of IFCs billed to Customers, whether
billed directly to such Customers by the Servicer or indirectly through an
Applicable ARES pursuant to Consolidated ARES Billing.
"BUDGET BILLING PLAN" means a levelized payment plan offered by the
Servicer which, if elected by a Customer, provides for level monthly charges to
such Customer on its Bills which are calculated by estimating, on an annual
basis, the amount that the Customer would pay during the next twelve months
(based on the Customer's actual usage during the prior twelve months) and then
charging the Customer 1/12th of that amount for each of the next twelve months,
with an annual reconciliation pursuant to which the payments made by such
Customer during the preceding twelve months are reconciled with the amount owed
by such Customer for actual usage during the same period, and the Customer is
given a credit or billed for the difference, as appropriate, based on such
reconciliation; PROVIDED, that, commencing in the first quarter of 1999, the
Budget Billing Plan will be modified to provide for level monthly charges to be
calculated by estimating, on a semi-annual or quarterly basis, the amount that
the Customer would pay during the next twelve months (based on the Customer's
actual usage during the prior twelve months) and then charging the Customer
1/12th of that amount for each month until the next such estimation, with an
annual reconciliation pursuant to which the payments made by such Customer
during the preceding twelve months are reconciled with the amount owed by such
Customer for actual usage during the same period, and the Customer is given a
credit or billed for the difference, as appropriate, based on such
reconciliation, subject to an option, on such terms as
I-1
the Servicer may offer to Customers, to pay such ▇▇▇▇ or receive such credit
through an increase or reduction to the level monthly payments for the next
twelve months.
"CLOSING ▇▇▇▇" means the final ▇▇▇▇ issued to a Customer at the time
service is terminated.
"CONSOLIDATED ARES BILLING" means the billing option available to
Customers served by an ARES pursuant to which such ARES will be responsible for
billing and collecting all charges to Customers electing such billing option,
including the IFCs, all in accordance with applicable ICC Regulations.
"ESTIMATION TEMPLATE" means the template shown on SCHEDULE 6 to this
Annex I, which template is used to calculate the IFC Payments estimated to have
been received by the Servicer during any Collection Period.
"IFC CUSTOMER CLASS" means the separate classes of Customers for IFC
billing purposes set forth in any Tariffs.
"NET IFC WRITE-OFFS" means, for any Billing Period, an amount equal to
the product of (i) Net Write-Offs for such period times (ii) a fraction, the
numerator of which equals total billed IFCs attributable to the Billing Period
which occurred five Collection Periods prior to such Billing Period and the
denominator of which equals total billed revenues attributable to such fifth
preceding Billing Period.
"NET WRITE-OFF PERCENTAGE" for any Billing Period means the number
(expressed as a percent) equal to: (i) the amount of Net Write-Offs for such
Billing Period, divided by (ii) the total billed revenues attributable to the
Billing Period which occurred five Collection Periods prior to such Billing
Period.
"NET WRITE-OFFS" means, for any Billing Period, the amount of bills
that were written off the Servicer's books during such period as uncollectible
in accordance with its customary practices, net of recoveries received during
such Billing Period in respect of any bills written off during any previous
Billing Period.
"SERVICER POLICIES AND PRACTICES" means, with respect to the
Servicer's duties under this Annex I, the policies and practices of the Servicer
applicable to such duties that the Servicer follows with respect to comparable
assets that it services for itself.
"VARIABLES" means the following variables underlying the Monthly
Collections Curves, each of which may be calculated in accordance with
applicable Servicer Policies and Practices:
(i) Billed IFCs collected during the Billing Period of issuance;
I-2
(ii) Billed IFCs collected during the first Billing Period after the
Billing Period of issuance;
(iii) Billed IFCs collected during the second Billing Period after
the Billing Period of issuance;
(iv) Billed IFCs collected during the third Billing Period after the
Billing Period of issuance;
(v) Billed IFCs collected during the fourth Billing Period after the
Billing Period of issuance; and
(vi) the estimated Net Write-Off Percentage.
SECTION 2. DATA ACQUISITION.
(a) INSTALLATION AND MAINTENANCE OF METERS. Except to the extent that an
ARES is responsible for such services pursuant to an ARES Service Agreement, the
Servicer shall cause to be installed, replaced and maintained meters in such
places and in such condition as will enable the Servicer to obtain usage
measurements for each Customer at least once every Billing Period.
(b) METER READING. At least once each Billing Period, the Servicer shall
obtain usage measurements from the Applicable MDMA for each Customer; PROVIDED,
HOWEVER, that the Servicer may determine any Customer's usage on the basis of
estimates in accordance with applicable ICC Regulations.
(c) COST OF METERING. Neither the Grantee nor the Note Issuer shall be
obligated to pay any costs associated with the metering duties set forth in this
Section 2, including, but not limited to, the costs of installing, replacing and
maintaining meters, nor shall the Grantee or the Note Issuer be entitled to any
credit against the Servicing Fee for any cost savings realized by the Servicer
or any ARES as a result of new metering and/or billing technologies.
SECTION 3. USAGE AND ▇▇▇▇ CALCULATION.
The Servicer shall obtain a calculation of each Customer's usage (which may
be based on data obtained from such Customer's meter read or on usage estimates
determined in accordance with applicable ICC Regulations) at least once each
Billing Period and shall determine therefrom each Customer's individual IFCs to
be included on such Customer's ▇▇▇▇; PROVIDED, HOWEVER, that in the case of
Customers served by an ARES under the Consolidated ARES Billing option, the
Applicable ARES, rather than the Servicer, may determine such Customers'
individual IFCs to be included on such Customer's Bills based on billing factors
provided by the Servicer, and, in such
I-3
case, the Servicer shall deliver to the Applicable ARES such billing factors
as are necessary for the Applicable ARES to calculate such Customers'
respective IFCs as such charges may change from time to time pursuant to the
Reconciliation or True-Up Adjustments. To the extent that current billing
information for any IFC Customer Class is not available for the applicable
Billing Period, the Servicer shall estimate Billed IFCs for such Billing
Period based on such IFC Customer Class's usage in the same Billing Period of
the preceding year (adjusted for normal growth and unusual weather) and shall
include such estimated amounts in the Monthly Collections Curves for such
Billing Period; provided, however, that the Servicer shall use the actual
Billed IFCs for the relevant Billing Period in calculating any Remittance
Shortfall or Excess Remittance relating to such Billing Period, even though
the actual Bills reflecting such Billed IFCs may have been issued in a later
Billing Period.
SECTION 4. BILLING.
The Servicer shall implement the IFCs as of the Closing Date and shall
thereafter ▇▇▇▇ each Customer or the Applicable ARES for the respective
Customer's outstanding current and past due IFCs accruing through December 31,
2008, or such longer period during which the Notes may remain outstanding, all
in accordance with the following:
(a) FREQUENCY OF BILLS; BILLING PRACTICES. In accordance with the
Servicer's then-existing Servicer Policies and Practices for its own charges, as
such Servicer Policies and Practices may be modified from time to time, the
Servicer shall generate and issue a ▇▇▇▇ to each Customer, or, in the case of a
Customer who has elected Consolidated ARES Billing, to the Applicable ARES, for
such Customer's respective IFCs once every applicable Billing Period, at the
same time, with the same frequency and on the same ▇▇▇▇ as that containing the
Servicer's own charges to such Customer or ARES, as the case may be. In the
event that the Servicer makes any material modification to these practices, it
shall notify the Grantee, the Note Issuer, the Indenture Trustee, and the Rating
Agencies prior to the effectiveness of any such modification; PROVIDED, HOWEVER,
that the Servicer may not make any modification that will materially adversely
affect the Holders.
(b) FORMAT.
(i) Each ▇▇▇▇ to a Customer shall contain the charge corresponding to
the respective IFCs owed by such Customer for the applicable Billing Period.
The IFCs and related credits shall each appear as a separate line-item on each
▇▇▇▇.
(ii) In the case of each Customer that has elected Consolidated ARES
Billing, the Servicer shall deliver to the Applicable ARES itemized charges for
such Customer setting forth such Customer's IFCs and related credits, each as a
separate line-item.
(iii) The Servicer shall conform to such requirements in respect
of the format, structure and text of Bills delivered to Customers and ARES as
applicable ICC Regulations shall
I-4
from time to time prescribe. To the extent that ▇▇▇▇ format, structure and
text are not prescribed by the Public Utilities Act or by applicable ICC
Regulations, the Servicer shall, subject to clauses (i) and (ii) above,
determine the format, structure and text of all Bills in accordance with its
reasonable business judgment, its Servicer Policies and Practices with
respect to its own charges and prevailing industry standards.
(c) ALLOCATIONS OF IFCS. IFCs and related credits shall be deducted from
all amounts constituting Applicable Rates and from all charges to Customers from
which IFCs must be deducted pursuant to the Funding Orders, whether or not such
Applicable Rates or charges are computed on a cents per kilowatt hours basis,
according to some other usage-based calculation, on a fixed basis, or in any
other fashion or by any combination of the foregoing. If the IFCs calculated
for any Customer for any Billing Period exceeds the amount of its otherwise
Applicable Rates, then the ▇▇▇▇ to such Customer shall reflect an IFC and
related credit each equal to the total amount of such Applicable Rates.
(d) DELIVERY. The Servicer shall deliver all Bills to Customers (i) by
United States Mail in such class or classes as are consistent with the Servicer
Policies and Practices followed by the Servicer with respect to its own charges
to its customers or (ii) by any other means, whether electronic or otherwise,
that the Servicer may from time to time use to present its own charges to its
customers. In the case of Customers that have elected Consolidated ARES
Billing, the Servicer shall deliver all Bills to the Applicable ARES by such
means as are prescribed by applicable ICC Regulations, or if not prescribed by
applicable ICC Regulations, by such means as are mutually agreed upon by the
Servicer and the Applicable ARES and are consistent with ICC Regulations. The
Servicer or an ARES, as applicable, shall pay from its own funds all costs of
issuance and delivery of all Bills, including but not limited to printing and
postage costs as the same may increase or decrease from time to time.
SECTION 5. CUSTOMER SERVICE FUNCTIONS.
The Servicer shall handle all Customer inquiries and other Customer service
matters according to the same procedures it uses to service Customers with
respect to its own charges.
SECTION 6. COLLECTIONS; PAYMENT PROCESSING; REMITTANCE.
(a) COLLECTION EFFORTS, POLICIES, PROCEDURES.
(i) The Servicer shall use reasonable efforts to collect all Billed
IFCs from Customers and Third-Party Collectors (including ARES) as and when the
same become due and shall follow such collection procedures as it follows with
respect to comparable assets that it services for itself or others, including
with respect to the following:
I-5
(A) The Servicer shall prepare and deliver overdue notices to
Customers and ARES in accordance with applicable ICC Regulations
and Servicer Policies and Practices.
(B) The Servicer shall apply late payment charges to outstanding
Customer and ARES balances in accordance with applicable ICC
Regulations. All late payment charges and interest collected
shall be payable to and retained by the Servicer as a component
of its compensation under the Agreement, and the Note Issuer
shall have no right to share in the same.
(C) The Servicer shall deliver verbal and written final notices of
delinquency and possible disconnection in accordance with
applicable ICC Regulations and Servicer Policies and Practices.
(D) The Servicer shall adhere to and carry out disconnection policies
in accordance with the Public Utilities Act and applicable ICC
Regulations and Servicer Policies and Practices.
(E) The Servicer may employ the assistance of collection agents to
collect any past-due IFCs in accordance with applicable ICC
Regulations and Servicer Policies and Practices and the Tariffs.
(F) The Servicer shall apply Customer and ARES deposits to the
payment of delinquent accounts in accordance with applicable ICC
Regulations and Servicer Policies and Practices and according to
the priorities set forth in Section 6(b)(ii), (iii) and (iv) of
this Annex I.
(ii) The Servicer shall not waive any late payment charge or any other
fee or charge relating to delinquent payments, if any, or waive, vary or modify
any terms of payment of any amounts payable by a Customer, in each case unless
such waiver or action: (A) would be in accordance with the Servicer's customary
practices or those of any successor Servicer with respect to comparable assets
that it services for itself and for others; (B) would not materially adversely
affect the rights of the Holders; and (C) would comply with applicable law;
PROVIDED, HOWEVER, that notwithstanding anything in the Agreement or this Annex
I to the contrary, the Servicer is authorized to write off any Billed IFCs, in
accordance with its Servicer Policies and Practices, that have remained
outstanding for 180 days or more.
(iii) The Servicer shall accept payment from Customers and
Third-Party Collectors in respect of Billed IFCs in such forms and methods
and at such times and places as it accepts for payment of its own charges.
The Servicer shall accept payment from ARES in respect of Billed IFCs in such
forms and methods and at such times and places as the Servicer and each ARES
shall mutually agree in accordance with applicable ICC Regulations and the
Servicer shall give prompt written notice to the Rating Agencies of any such
agreements.
I-6
(b) PAYMENT PROCESSING; ALLOCATION; PRIORITY OF PAYMENTS.
(i) The Servicer shall post all payments received to Customer
accounts as promptly as practicable, and, in any event, substantially all
payments shall be posted no later than five Servicer Business Days after
receipt.
(ii) Subject to clause (iii) below, the Servicer shall apply payments
received to each Customer's or Applicable ARES' account in proportion to the
charges contained on the outstanding ▇▇▇▇ to such Customer or Applicable ARES.
(iii) Any amounts collected by the Servicer that represent partial
payments of the total ▇▇▇▇ to a Customer or ARES shall be allocated as
follows: (A) first to amounts owed to the Note Issuer and ComEd (excluding
any late fees and interest charges), regardless of age, pro rata in
proportion to their respective percentages of the total amount of their
combined outstanding charges on such ▇▇▇▇; then (B) all late charges shall be
allocated to ComEd.
(iv) The Servicer shall hold all over-payments for the benefit of the
Note Issuer and ComEd and shall apply such funds to future ▇▇▇▇ charges in
accordance with clauses (ii) and (iii) above as such charges become due.
(v) For Customers on a Budget Billing Plan, the Servicer shall treat
IFC Payments received from such Customers as if such Customers had been billed
for their respective IFCs in the absence of the Budget Billing Plan; partial
payment of a Budget Billing Plan payment shall be allocated according to clause
(iii) above and overpayment of a Budget Billing Plan payment shall be allocated
according to clause (iv) above.
(c) ACCOUNTS; RECORDS.
The Servicer shall maintain accounts and records as to the Intangible
Transition Property accurately and in accordance with its standard accounting
procedures and in sufficient detail (i) to permit reconciliation between
payments or recoveries with respect to the Intangible Transition Property and
the amounts from time to time remitted to the Collection Account in respect of
the Intangible Transition Property and (ii) to permit the IFC Collections held
by the Servicer to be accounted for separately from the funds with which they
may be commingled, so that the dollar amounts of IFC Collections commingled with
the Servicer's funds may be properly identified and traced.
(d) INVESTMENT OF IFC PAYMENTS RECEIVED.
Prior to remittance on the applicable Monthly Remittance Date (or, to
the extent remittances are required more frequently under the Indenture, prior
to each Daily Remittance) the Servicer may invest IFC Payments received at its
own risk and for its own benefit, and such investments and, so long as the
Servicer complies with its obligations under the immediately
I-7
preceding section (c), such funds shall not be required to be segregated from
the other investment and funds of the Servicer.
(e) CALCULATION OF COLLECTIONS; DETERMINATION OF AGGREGATE REMITTANCE
AMOUNT.
(i) On or before each Monthly Remittance Date, the Servicer shall
calculate, in accordance with SCHEDULE 6, the total IFC Payments estimated to
have been received by the Servicer from or on behalf of Customers during the
prior Collection Period in respect of all previously Billed IFCs, increased or
decreased, as applicable, from and after the end of the seventh Billing Period
before such Monthly Remittance Date, by (A) the amount of any Remittance
Shortfall calculated for such Monthly Remittance Date or (B) the amount of any
Excess Remittance calculated for such Monthly Remittance Date or (C) to the
extent not included in Billed IFCs described above, the amount of any Allocable
IFC Revenue Amounts (collectively, the "AGGREGATE REMITTANCE AMOUNT"); PROVIDED,
however, that, (i) to the extent Daily Remittances are required under the
Servicing Agreement, the Servicer (x) shall include in the Daily Remittance on
each Servicer Business Day an amount equal to the total IFC Payments estimated
to be received during the then current Collection Period based on the Monthly
Collections Curve divided by the number of Servicer Business Days in such
Collection Period, (y) shall calculate, on a monthly basis no later than ___
Servicer Business Days on or before each Monthly Remittance Date, the total IFC
Payments estimated to have been received by the Servicer since the previous
Monthly Remittance Date in respect of all previously Billed IFCs, and (z) any
decreases under clause (A) above or increases under clause (B) above shall be
included only in the Aggregate Remittance Amount distributed on any Monthly
Remittance Date and (ii) no Excess Remittance shall be withdrawn from the
Collection Account if such withdrawal would cause the amounts on deposit in the
General Subaccount or the Reserve Subaccount to be insufficient for the payment
of the next installment of interest on the Notes.
(ii) On or before each Reconciliation Adjustment Date and on or before
the date of any required True-Up Adjustment, in accordance with Section 4.01(b)
of the Agreement, the Servicer shall, in a timely manner so as to perform all
required calculations under such Section 4.01(b), update the Variables
underlying the Monthly Collections Curve in SCHEDULE 6 and shall revise such
curve to reflect the updated Variables.
(iii) The Servicer, the Grantee and the Note Issuer as its assignee
acknowledge that the Servicer has undertaken to make certain changes to its
current computerized customer information system, which changes, when
functional, would affect the Servicer's method of calculating the IFC
Payments estimated to have been received by the Servicer during each
Collection Period as set forth in Schedule 6 hereto. Should these changes to
the computerized customer information system become functional during the
term of the Agreement, the Servicer, the Grantee and the Note Issuer agree
that they shall review the procedures used to calculate the IFC Payments
estimated to have been received, as set forth on Schedule 6, in light of the
capabilities of such new system and shall amend this Annex I in writing to
make such
I-8
modifications and/or substitutions to such procedures and to clause (ii)
above as may be appropriate in the interests of efficiency, accuracy, cost
and/or system capabilities; provided, however, that the Servicer may not make
any modification or substitution that will materially adversely affect the
Noteholders. As soon as practicable, and in no event later than 60 Business
Days after the date on which all Customer accounts are being billed under
such new system, the Servicer shall notify the Grantee, the Note Issuer, the
Indenture Trustee and the Rating Agencies of the same.
(iv) All calculations of collections, each update of the Variables and
any changes in procedures used to calculate the IFC Payments pursuant to this
Section 6(e) shall be made in good faith, and in the case of any update pursuant
to clause (ii) or any change in procedures pursuant to clause (iii), in a manner
reasonably intended to provide estimates and calculations that are at least as
accurate as those that would be provided on the Closing Date utilizing the
initial Variables and procedures.
(f) ALLOCABLE IFC REVENUE AMOUNTS
(i) The Servicer shall monitor ComEd's receipt of any fixed payments
of transition charges under Section 16-108(h) of the Public Utilities Act, and
shall, concurrently with such receipt, set aside and allocate for the benefit of
the Grantee and the Note Issuer, as proceeds of the Intangible Transition
Property, an amount with respect to each Customer equal to the product of (a)
the IFC which is then in effect for such Customer at the time of receipt TIMES
(b) the total number of kilowatt hours utilized to compute the amount of such
fixed transition charges.
(ii) The Servicer shall monitor ComEd's receipt of any revenues
derived from condemnation proceedings or FERC stranded cost recoveries or any
other amounts which reflect compensation for lost revenues which would otherwise
have been attributable to Applicable Rates (collectively, "LOST REVENUE
RECOVERIES"), and shall, concurrently with the receipt thereof, set aside and
allocate for the benefit of the Grantee and the Note Issuer, as proceeds of the
Intangible Transition Property, an amount equal to (a) the total dollar amount
of such Lost Revenue Recoveries TIMES (b) a fraction, (1) the numerator of which
equals the weighted average of the IFCs applicable to all classes of Customers
the revenues from which are included in the calculation of such Lost Revenue
Recoveries and (2) the denominator of which equals the weighted average of the
Applicable Rates charged to such Customers, with such weighted averages to be in
each case calculated based on the respective IFCs and Applicable Rates
applicable to such classes for the most recent calendar year then ended.
(iii) All amounts set aside pursuant this Section 6(f) shall
constitute Allocable IFC Revenue Amounts, shall comprise part of the Intangible
Transition Property, shall be included in the Aggregate Remittance Amount and
shall be remitted to the Indenture Trustee in accordance with the other
provisions of this Servicing Agreement and the Indenture.
I-9
(g) REMITTANCES.
(i) The Note Issuer shall cause to be established the Collection
Account in the name of the Indenture Trustee in accordance with the Indenture.
(ii) The Servicer shall make remittances to the Collection Account in
accordance with Section 6.11 of the Agreement.
(iii) In the event of any change of account or change of institution
affecting the Collection Account, the Note Issuer shall provide written
notice thereof to the Servicer by the earlier of: (A) five Business Days from
the effective date of such change, or (B) five Business Days prior to the
next Monthly Remittance Date.
I-10
SCHEDULE 6
TO ANNEX I
COMPUTATION OF AGGREGATE REMITTANCE AMOUNT
Subject to Section 6(e)(iii), the following model shall be used to determine the
IFC Payments estimated to have been received by the Servicer during each
Collection Period.
I. ASSUMPTIONS
A. The IFCs implemented with respect to a given Series or Class of Notes shall
go into effect on the Series Issuance Date for such Series or Class of
Notes.
B. The IFCs (and corresponding credit) for each Series or Class of Notes will
be levied on all electricity usage recorded on Bills issued on or after the
applicable Series Issuance Date whether or not a portion of such
electricity usage was actually incurred prior to the Series Issuance Date
for such Series or Class of Notes, but excluding Bills issued in respect of
Billing Periods prior to the Billing Period in which such Series Issuance
Date occurs.
C. Customer billing occurs in cycles of approximately 21 Business Days, 12
times each year.
D. The pattern of collections has not varied materially over the last five
years.
E. The initial Monthly Collections Curve (i.e. collection amounts for each
month) for each of the 13 IFC Customer Classes is based on a statistically
valid sample of customer billing data from each of the 13 IFC Customer
Classes between July 1996 and June 1997.
F. Initially, each month has an estimated incremental collection percentage
shown in Figure 1 below.
G. The Variables underlying the Monthly Collections Curves will be reviewed
annually and revised as necessary to reflect updated data, including
changes in the degree to which Customers are billed indirectly by an
Applicable ARES and/or such Applicable ARES are obligated to pay directly
on behalf of end-user Customers.
H. The Monthly Collections Curves will be calculated on the assumption that
Bills not yet collected during the last Billing Period of calculation for
the curves have in fact been collected during such last Billing Period
except to the extent of Net Write Offs for such Billing Period.
I-6-1
MONTHLY COLLECTIONS CURVE
The initial Monthly Collections Curve for each IFC Customer Class is shown below
in Figure 1.
IFC Customer Billing Collection Periods
Class Period After Billing Period
------------ --------- --------------------------------
1 2 3 4
--------------------------------------------
Residential - No Space Heat A(1) B(1) C(1) D(1) E(1)
Residential - Space Heat A(2) B(2) C(2) D(2) E(2)
Standby Service A(3) B(3) C(3) D(3) E(3)
Interruptible Service A(4) B(4) C(4) D(4) E(4)
Street Lighting - Fixture Based Rates A(5) B(5) C(5) D(5) E(5)
Street Lighting - Dusk to ▇▇▇▇ and Traffic Signal A(6) B(6) C(6) D(6) E(6)
Railroads A(7) B(7) C(7) D(7) E(7)
Water-Supply and Sewage Pumping Service A(8) B(8) C(8) D(8) E(8)
In Lieu of Demand A(9) B(9) C(9) D(9) E(9)
0 to and including 100 kWh Demand A(10) B(10) C(10) D(10) E(10)
Over 100 to and including 1,000 kWh Demand A(11) B(11) C(11) D(11) E(11)
Over 1,000 to and including 10,000 kWh Demand A(12) B(12) C(12) D(12) E(12)
Over 10,000 kWh Demand A(13) B(13) C(13) D(13) E(13)
I-6-2
II. ESTIMATION TEMPLATE
Where:
M(n) = the Collection Period corresponding to the current Billing
Period
X(n) = IFC Charges billed during the Billing Period n periods prior
to the current Billing Period
A = percentage collected during M(n) of the total Billed IFCs
billed during the current Billing Period
B = percentage collected during M(n) of the total Billed IFCs
billed during the Billing Period prior to the current
Billing Period
C = percentage collected during M(n) of the total Billed IFCs
billed during the Billing Period two periods prior to the
current Billing Period
D = percentage collected during M(n) of the total Billed IFCs
billed during the Billing Period three periods prior to the
current Billing Period
E = percentage collected during M(n) of the total Billed IFCs
billed during the Billing Period four periods prior to the
current Billing Period
Then:
IFC Payments estimated to have been received during a Collection
Period (prior to any adjustments for a Remittance Shortfall or Excess
Remittance) equal Z, as shown in the Estimation Template below.
I-6-3
ESTIMATION TEMPLATE
IFC PAYMENTS ESTIMATED TO HAVE BEEN RECEIVED
BY THE SERVICER DURING THE COLLECTION PERIOD OF M(N)
FOR EACH IFC CUSTOMER CLASS:
COLLECTION BILLED IFC ESTIMATED
PERCENT CHARGES COLLECTIONS
(S) (T) (S x T)
E X(4) (E)(X(4))
D X(-3) (D)(X(3))
C X(-2) (C)(X(2))
B X(1) (B)(X(1))
A X(0) (A)(X(0))
----------------------
TOTAL: Z
IFC Customer Class
----------------------
----------------------
13
ESTIMATED IFC PAYMENTS = SUM Z(IFC Customer Class n) = Z(i)
[s]
where "i" is the IFC Customer
I-6-4