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AMENDED AND RESTATED
INTANGIBLE TRANSITION PROPERTY
SALE AGREEMENT
between
PECO ENERGY TRANSITION TRUST
Issuer
and
PECO ENERGY COMPANY
Seller
Dated as of [ ], 2000
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TABLE OF CONTENTS
Page
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ARTICLE I
Definitions
SECTION 1.01. Definitions....................................................2
SECTION 1.02. Other Definitional Provisions..................................9
ARTICLE II
Conveyance of Intangible Transition Property
SECTION 2.01. Conveyance of Initial Intangible
Transition Property...........................10
SECTION 2.02. Conveyance of Subsequent Intangible
Transition Property...........................11
SECTION 2.03. Conditions to Conveyance of Intangible
Transition Property...........................11
ARTICLE III
Representations and Warranties of Seller
SECTION 3.01. Organization and Good Standing.............................14
SECTION 3.02. Due Qualification..........................................14
SECTION 3.03. Power and Authority........................................15
SECTION 3.04. Binding Obligation.........................................15
SECTION 3.05. No Violation...............................................15
SECTION 3.06. No Proceedings.............................................16
SECTION 3.07. Approvals..................................................17
SECTION 3.08. The Intangible Transition Property.........................17
ARTICLE IV
Covenants of the Seller
SECTION 4.01. Corporate Existence........................................23
SECTION 4.02. No Liens or Conveyances....................................23
SECTION 4.03. Delivery of Collections....................................24
SECTION 4.04. Notice of Liens............................................24
SECTION 4.05. Compliance with Law........................................25
SECTION 4.06. Covenants Related to Intangible Transition
Property......................................25
SECTION 4.07. Notice of Indemnification Events...........................27
SECTION 4.08. Protection of Title........................................27
SECTION 4.09. Taxes......................................................28
Contents, p. ii
Page
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ARTICLE V
The Seller
SECTION 5.01. Liability of Seller; Indemnities and
Liquidated Damages............................29
SECTION 5.02. Merger or Consolidation of, or Assumption
of the Obligations of, Seller.................36
SECTION 5.03. Limitation on Liability of Seller
and Others....................................38
SECTION 5.04. Opinions of Counsel........................................39
ARTICLE VI
Miscellaneous Provisions
SECTION 6.01. Amendment..................................................40
SECTION 6.02. Notices....................................................41
SECTION 6.03. Assignment.................................................42
SECTION 6.04. Limitations on Rights of Others............................42
SECTION 6.05. Severability...............................................42
SECTION 6.06. Separate Counterparts......................................42
SECTION 6.07. Headings...................................................43
SECTION 6.08. Governing Law..............................................43
SECTION 6.09. Assignment to Bond Trustee.................................43
SECTION 6.10. Nonpetition Covenant.......................................44
SECTION 6.11. Limitation of Liability of Issuer Trustee..................44
SECTION 6.12. Perfection.................................................45
AMENDED AND RESTATED INTANGIBLE TRANSITION PROPERTY SALE
AGREEMENT dated as of [ ], 2000, between PECO ENERGY
TRANSITION TRUST, a Delaware business trust (the
"Issuer"), and PECO ENERGY COMPANY, a Pennsylvania
corporation, and its successors in interest to the
extent permitted hereunder, as Seller (the "Seller").
WHEREAS the Issuer desires to purchase from time to time Intangible
Transition Property created pursuant to the Statute and the Qualified Rate
Orders;
WHEREAS the Seller is willing to sell Intangible Transition Property to the
Issuer;
WHEREAS the Issuer, in order to finance the purchase of the Transferred
Intangible Transition Property, will from time to time issue Transition Bonds
under the Indenture;
WHEREAS the Issuer, to secure its obligations under all Transition Bonds
and the Indenture, will pledge its right, title and interest in the Transferred
Intangible Transition Property to the Bond Trustee for the benefit of the
Transition Bondholders; and
WHEREAS the Issuer has determined that the transactions contemplated by the
Basic Documents are in the best interest of the Issuer and its creditors and
represent
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a prudent and advisable course of action that does not impair the rights and
interests of the Issuer's creditors.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. (a) Whenever used in this Agreement, each of the
following words and phrases shall have the following meaning:
"Addition Notice" means, with respect to the transfer of Subsequent
Intangible Transition Property to the Issuer pursuant to Section 2.02, notice,
which shall be given by the Seller to the Issuer and the Rating Agencies not
later than 10 days prior to the related Subsequent Transfer Date, specifying the
Subsequent Transfer Date for such Subsequent Intangible Transition Property.
"Affected Transition Bonds" means all of the Transition Bonds; provided
that if the Seller is obligated pursuant to Section 5.01(d)(i) to pay amounts
for deposit into the General Subaccount of the Collection Account for a breach
of a representation or warranty which relates to one Qualified Rate Order (such
Qualified Rate Order, a "Breaching QRO"), but not both of the Qualified Rate
Orders,
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then "Affected Transition Bonds" shall mean only the Series of Transition Bonds
issued in connection with the Breaching QRO.
"Agreement" means this Amended and Restated Intangible Transition Property
Sale Agreement, as the same may be amended and supplemented from time to time.
"▇▇▇▇ of Sale" means a ▇▇▇▇ of sale substantially in the form of Exhibit A
hereto.
"Breaching QRO" has the meaning specified in the definition of Affected
Transition Bonds.
"Business Day" has the meaning specified in the Master Servicing Agreement.
"Competitive Transition Charges" has the meaning specified in the Master
Servicing Agreement.
"Corporate Trust Office" means,(i) with respect to the Bond Trustee, ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ 12 East, New York, New York 10286, Attention: Asset Backed
Finance Unit, or the principal corporate trust office of any successor Bond
Trustee (the address of which the successor Bond Trustee will notify the
Transition Bondholders and the Issuer), and (ii) with respect to the Issuer
Trustee, c/o First Union Trust Company, National Association, One ▇▇▇▇▇▇ Square,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
"Customers" has the meaning specified in the Master Servicing Agreement.
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"De Minimis Loss Amount" has the meaning specified in Section 5.01(d)(iii).
"Duff" has the meaning specified in the Master Servicing Agreement.
"Fitch IBCA" has the meaning specified in the Master Servicing Agreement.
"Indemnification Event" has the meaning specified in Section 5.01(c)(i).
"Indenture" means the Indenture dated as of March 1, 1999, between the
Issuer and The Bank of New York, as the same may be amended and supplemented
from time to time.
"Initial Intangible Transition Property" means the Intangible Transition
Property, as identified in the related ▇▇▇▇ of Sale, sold to the Issuer on the
Initial Transfer Date pursuant to this Agreement in connection with the issuance
of the Series 1999-A Transition Bonds.
"Initial Loss Calculation Date" has the meaning specified in Section
5.01(c)(ii).
"Initial Transfer Date" means March 25, 1999.
"Intangible Transition Charges" has the meaning specified in the Master
Servicing Agreement.
"Intangible Transition Property" has the meaning specified in the Master
Servicing Agreement.
"ITC Collections" has the meaning specified in the Master Servicing
Agreement.
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"Lien" has the meaning specified in the Master Servicing Agreement.
"Liquidated Damages Amount" means an amount equal to the sum of (i) all
amounts due to the Bond Trustee or the Issuer Trustee in respect of expenses or
indemnity payments, (ii) the then outstanding principal amount of the Affected
Transition Bonds as of the Liquidated Damages Redemption Date and unpaid
interest accrued thereon to such date, (iii) amounts due to the Issuer in
respect of any other fees or Operating Expenses of the Issuer or indemnity
payments and (iv) amounts due to any Counterparty in respect of the termination
of a Swap Agreement related to the Affected Transition Bonds.
"Liquidated Damages Payment Date" means the date that is (i) 90 days after
the date of a breach of a representation or warranty specified in Section
3.08(b),(c),(d)(i), (d)(ii), (d)(iv) or (f) if the Seller (A) has the long term
debt ratings specified by, and enters into the binding agreement described in,
Section 5.01(d)(i)(B)(i) or (B) does not have such long term debt ratings but
makes the deposit required by Section 5.01(d)(i)(B)(ii) or (ii) in all other
cases, two Business Days after the date of such breach.
"Losses" has the meaning specified in the Master Servicing Agreement.
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"Master Servicing Agreement" means the Amended and Restated Master
Servicing Agreement dated as of [ ], 2000, among the Issuer, the Servicer and
any Other Issuers, as the same may be amended and supplemented from time to
time.
"Monthly Allocation Date" has the meaning specified in the Master Servicing
Agreement.
"Moody's" has the meaning specified in the Master Servicing Agreement.
"Mortgage" has the meaning specified in the Master Servicing Agreement.
"Officers' Certificate" means a certificate signed by (a) the chairman of
the board, the president, the vice chairman of the board, the executive vice
president or any vice president and (b) a treasurer, assistant treasurer,
secretary or assistant secretary, in each case of the Seller or the Servicer, as
appropriate.
"Opinion of Counsel" means one or more written opinions of counsel who may
be an employee of or counsel to the Seller or the Servicer, which counsel shall
be reasonably acceptable to the Bond Trustee, the Issuer or the Rating Agencies,
as applicable, and which shall be in form reasonably satisfactory to the Bond
Trustee, if applicable.
"Other Issuer" means any Person other than the Issuer that issues Other
Transition Bonds secured by
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Intangible Transition Property sold by the Seller to such Person in accordance
with Section 4.02 of this Agreement.
"Other Transition Bonds" means "transition bonds" (as defined in the
Statute) issued by any Other Issuer.
"PECO Energy" has the meaning specified in the Master Servicing Agreement.
"PUC" has the meaning specified in the Master Servicing Agreement.
"PUC Regulations" has the meaning specified in the Master Servicing
Agreement.
"Qualified Rate Orders" has the meaning specified in the Master Servicing
Agreement.
"Qualified Transition Expenses" has the meaning specified in the Master
Servicing Agreement.
"Rate Class" has the meaning specified in the Master Servicing Agreement.
"Retained Intangible Transition Property" means Intangible Transition
Property other than (i) the Transferred Intangible Transition Property and (ii)
any Intangible Transition Property sold to Other Issuers.
"Serviced Intangible Transition Property" has the meaning specified in the
Master Servicing Agreement.
"Servicer" means PECO Energy, as the servicer of the Intangible Transition
Property, and each successor to PECO Energy (in the same capacity) pursuant to
Section 5.03 or 6.04 of the Master Servicing Agreement.
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"Servicer Default" means an event specified in Section 6.01 of the Master
Servicing Agreement.
"Standard & Poor's" has the meaning specified in the Master Servicing
Agreement.
"Statute" has the meaning specified in the Master Servicing Agreement.
"Subsequent Intangible Transition Property" means Intangible Transition
Property, as identified in the related ▇▇▇▇ of Sale, sold to the Issuer on any
Subsequent Transfer Date in connection with the issuance of a Series of
Transition Bonds.
"Subsequent Transfer Date" means any date on which Subsequent Intangible
Transition Property is to be transferred to the Issuer pursuant to Section 2.02.
"Third Party" has the meaning specified in the Master Servicing Agreement.
"Transferred Intangible Transition Property" means, collectively, the
Initial Intangible Transition Property and any Subsequent Intangible Transition
Property.
"Trust Agreement" means the Second Amended and Restated Trust Agreement
dated as of [ ], 2000, among the Seller, the Issuer Trustee and the other
trustees named therein, as the same may be amended and supplemented from time to
time.
"UCC" has the meaning specified in the Master Servicing Agreement.
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(b) Except as otherwise specified herein or as the context may otherwise
require, each of the following terms has the meaning set forth in the Indenture
for all purposes of this Agreement, and the definitions of such terms are
equally applicable both to the singular and plural forms of such terms:
Term Section of the Indenture
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Adjustment Date............................................. 1.01(a)
Affiliate................................................... 1.01(a)
Basic Documents............................................. 1.01(a)
Bond Trustee................................................ 1.01(a)
Capital Subaccount.......................................... 1.01(a)
Collateral.................................................. 1.01(a)
Collection Account.......................................... 1.01(a)
Counterparty................................................ 1.01(a)
General Subaccount.......................................... 1.01(a)
Holders or Transition
Bondholders . . . . . . . . . 1.01(a)
Issuer Trustee.............................................. 1.01(a)
Liquidated Damages.......................................... 1.01(a)
Liquidated Damages Redemption
Date...................................................... 1.01(a)
Loss Subaccount............................................. 1.01(a)
Monthly Servicing Fee....................................... 1.01(a)
Operating Expenses.......................................... 1.01(a)
Overcollateralization Amount................................ 1.01(a)
Person...................................................... 1.01(a)
Rating Agency............................................... 1.01(a)
Rating Agency Condition..................................... 1.01(a)
Reserve Subaccount.......................................... 1.01(a)
Series...................................................... 1.01(a)
Swap Agreement.............................................. 1.01(a)
Transition Bonds............................................ 1.01(a)
SECTION 1.02. Other Definitional Provisions. (a) The words "hereof",
"herein", "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular
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provision of this Agreement; Section, Schedule and Exhibit references contained
in this Agreement are references to Sections, Schedules and Exhibits in or to
this Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation".
(b) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
ARTICLE II
Conveyance of Intangible Transition Property
SECTION 2.01. Conveyance of Initial Intangible Transition Property. (a) In
consideration of the Issuer's delivery to or upon the order of the Seller of
$3,994,560,476, subject to the conditions specified in Section 2.03, the Seller
does hereby irrevocably sell, transfer, assign, set over and otherwise convey to
the Issuer, without recourse (subject to the obligations herein), all right,
title and interest of the Seller in and to the Initial Intangible Transition
Property (such sale, transfer, assignment, set over and conveyance of the
Initial Intangible Transition Property includes, to the fullest extent permitted
by the Statute, the assignment of all revenues, collections, claims, rights,
payments, money or proceeds of or arising from the Intangible Transition
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Charges related to the Initial Intangible Transition Property, as the same may
be adjusted from time to time). Such sale, transfer, assignment, set over and
conveyance is hereby expressly stated to be a sale and, pursuant to Section
2812(e) of the Statute, shall be treated as an absolute transfer of all of the
Seller's right, title and interest (as in a true sale), and not as a pledge or
other financing, of the Initial Intangible Transition Property. The preceding
sentence is the statement referred to in Section 2812(e) of the Statute. The
Seller agrees and confirms that after giving effect to the sale contemplated
hereby it has no rights in the Initial Intangible Transition Property to which a
security interest of creditors of the Seller could attach because it has sold
all rights in the Initial Intangible Transition Property to the Issuer pursuant
to Section 2812(e) of the Statute.
(b) Subject to the conditions specified in Section 2.03, the Issuer does
hereby purchase the Initial Intangible Transition Property from the Seller for
the consideration set forth in paragraph (a) above.
(c) The Seller and the Issuer each acknowledge and agree that the purchase
price for the Initial Intangible Transition Property sold pursuant to this
Agreement is equal to its fair market value at the time of sale.
SECTION 2.02. Conveyance of Subsequent Intangible Transition Property. The
Seller may from time to time offer
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to sell additional Intangible Transition Property to the Issuer, subject to the
conditions specified in Section 2.03. If any such offer is accepted by the
Issuer, such Subsequent Intangible Transition Property shall be sold to the
Issuer effective on the Subsequent Transfer Date specified in the related
Addition Notice, subject to the satisfaction or waiver of the conditions
specified in Section 2.03.
SECTION 2.03. Conditions to Conveyance of Intangible Transition Property.
The Seller shall be permitted to sell Intangible Transition Property to the
Issuer only upon the satisfaction or waiver of each of the following conditions:
(i) on or prior to the Initial Transfer Date or Subsequent Transfer
Date, as applicable, the Seller shall have delivered to the Issuer a duly
executed ▇▇▇▇ of Sale identifying the Intangible Transition Property to be
conveyed on that date;
(ii) as of the Initial Transfer Date or the Subsequent Transfer Date,
as applicable, the Seller was not insolvent and will not have been made
insolvent by such sale and the Seller is not aware of any pending
insolvency with respect to itself;
(iii) as of the Initial Transfer Date or the Subsequent Transfer Date,
as applicable, no breach by the Seller of its representations, warranties
or
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covenants in this Agreement shall exist; and no Servicer Default shall have
occurred and be continuing;
(iv) as of the Initial Transfer Date or the Subsequent Transfer Date,
as applicable, (A) the Issuer shall have sufficient funds available to pay
the purchase price for the Transferred Intangible Transition Property to be
conveyed on such date and (B) all conditions to the issuance of one or more
Series of Transition Bonds intended to provide such funds set forth in the
Indenture shall have been satisfied or waived;
(v) on or prior to the Initial Transfer Date or Subsequent Transfer
Date, as applicable, the Seller shall have taken all action required to
transfer to the Issuer ownership of the Transferred Intangible Transition
Property to be conveyed on such date, free and clear of all Liens other
than Liens created by the Issuer pursuant to the Indenture; and the Issuer
or the Servicer, on behalf of the Issuer, shall have taken any action
required for the Issuer to grant the Bond Trustee a first priority
perfected security interest in the Collateral and maintain such security
interest as of such date;
(vi) in the case of a sale of Subsequent Intangible Transition
Property only, on or prior to such Subsequent Transfer Date, the Seller
shall have
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provided the Issuer and the Rating Agencies with a timely Addition Notice;
(vii) the Seller shall have delivered to the Rating Agencies and the
Issuer (A) an Opinion of Counsel with respect to the transfer of the
Transferred Intangible Transition Property then being conveyed to the
Issuer substantially in the form of Exhibit B hereto and (B) the Opinion of
Counsel required by Section 5.04(a); and
(viii) the Seller shall have delivered to the Bond Trustee and the
Issuer an Officers' Certificate confirming the satisfaction of each
condition precedent specified in this Section 2.03.
ARTICLE III
Representations and Warranties of Seller
As of the Initial Transfer Date and as of any Subsequent Transfer Date, as
applicable, the Seller makes the following representations and warranties on
which the Issuer has relied and will rely in acquiring Transferred Intangible
Transition Property. The representations and warranties shall survive the sale
of Transferred Intangible Transition Property to the Issuer and the pledge
thereof to the Bond Trustee pursuant to the Indenture.
SECTION 3.01. Organization and Good Standing. The Seller is a corporation
duly organized and in good standing under the laws of the Commonwealth of
Pennsylvania,
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with corporate power and authority to own its properties and conduct its
business as currently owned or conducted.
SECTION 3.02. Due Qualification. The Seller 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 shall require such
qualifications, licenses or approvals (except where the failure to so qualify
would not be reasonably likely to have a material adverse effect on the Seller's
business, operations, assets, revenues, properties or prospects).
SECTION 3.03. Power and Authority. The Seller has the corporate power and
authority to execute and deliver this Agreement and to carry out its terms; the
Seller has full corporate power and authority to own the Intangible Transition
Property and sell and assign the Initial Intangible Transition Property, in the
case of the Initial Transfer Date, and the Subsequent Intangible Transition
Property, in the case of each Subsequent Transfer Date, as applicable, and the
Seller has duly authorized such sale and assignment to the Issuer by all
necessary corporate action; and the execution, delivery and performance of this
Agreement has been duly authorized by the Seller by all necessary corporate
action.
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SECTION 3.04. Binding Obligation. This Agreement constitutes a legal, valid
and binding obligation of the Seller enforceable against the Seller in
accordance with its terms subject to bankruptcy, receivership, insolvency,
fraudulent transfer, reorganization, moratorium or other laws affecting
creditors' rights generally from time to time in effect and to general
principles of equity (regardless of whether considered in a proceeding in equity
or at law).
SECTION 3.05. No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof do not
conflict with, result in any breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time) a default under, the
articles of incorporation or by-laws of the Seller, or any indenture, agreement
or other instrument to which the Seller is a party or by which it shall be
bound; nor result in the creation or imposition of any Lien upon any of its
properties (other than the lien of the Mortgage on the Seller's interest in the
Monthly Servicing Fee and any other rights under this Agreement in accordance
with the terms of this Agreement) pursuant to the terms of any such indenture,
agreement or other instrument; nor violate any law or any order, rule or
regulation applicable to the Seller of any court or of any Federal or state
regulatory body, administrative agency or other governmental
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instrumentality having jurisdiction over the Seller or its properties.
SECTION 3.06. No Proceedings. There are no proceedings or investigations
pending or, to the Seller's best knowledge, threatened, before any court,
Federal or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or its properties (i)
asserting the invalidity of the Basic Documents or the Transition Bonds, (ii)
seeking to prevent the issuance of the Transition Bonds or the consummation of
any of the transactions contemplated by the Basic Documents or the Transition
Bonds or (iii) except as disclosed by the Seller to the Issuer, seeking any
determination or ruling that could reasonably be expected to materially and
adversely affect the performance by the Seller of its obligations under, or the
validity or enforceability of, the Basic Documents or the Transition Bonds.
SECTION 3.07. Approvals. Except for UCC continuation filings, no approval,
authorization, consent, order or other action of, or filing with, any court,
Federal or state regulatory body, administrative agency or other governmental
instrumentality is required in connection with the execution and delivery by the
Seller of this Agreement, the performance by the Seller of the transactions
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contemplated hereby or the fulfillment by the Seller of the terms hereof, except
those that have been obtained or made.
SECTION 3.08. The Intangible Transition Property. (a) Information. All
information provided by the Seller to the Issuer with respect to the Transferred
Intangible Transition Property is correct in all material respects.
(b) Effect of Transfer. The transfers and assignments herein contemplated
constitute sales of the Initial Intangible Transition Property or the Subsequent
Intangible Transition Property, as the case may be, from the Seller to the
Issuer and the beneficial interest in and title to the Transferred Intangible
Transition Property would not be part of the debtor's estate in the event of the
filing of a bankruptcy petition by or against the Seller under any bankruptcy
law.
(c) Transfer Filings. The Seller is the sole owner of the Intangible
Transition Property being sold to the Issuer on the Initial Transfer Date or
Subsequent Transfer Date, as applicable; the Transferred Intangible Transition
Property has been validly transferred and sold to the Issuer free and clear of
all Liens other than Liens created by the Issuer pursuant to the Indenture. All
filings, including filings with the PUC under the Statute, necessary in any
jurisdiction to give the Issuer a valid ownership interest in the Transferred
Intangible Transition
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Property, free and clear of all Liens of the Seller or anyone claiming through
the Seller, and to give the Bond Trustee a first priority perfected security
interest in the Transferred Intangible Transition Property have been made, other
than any such filings (except for filings with the PUC under the Statute and UCC
filings with the Secretary of State of the State of Delaware) the absence of
which would not have an adverse impact on (i) the ability of the Servicer to
collect Intangible Transition Charges with respect to the Serviced Intangible
Transition Property or (ii) the rights of the Issuer or the Bond Trustee with
respect to the Transferred Intangible Transition Property.
(d) Irrevocable; Process Valid; No Litigation; Etc. (i) Each Qualified Rate
Order has been issued by the PUC in accordance with the Statute, such order and
the process by which it was issued comply with all applicable laws, rules and
regulations, and each such order is in full force and effect. (ii) As of the
date of issuance of any Series of Transition Bonds, such Transition Bonds are
entitled to the protections provided by the Statute and, accordingly, the
provisions of each Qualified Rate Order relating to Intangible Transition
Property and Intangible Transition Charges are not revocable by the PUC. (iii)
(a) Under the Statute, neither the Commonwealth of Pennsylvania nor the PUC may
limit, alter or in any way impair or reduce the value of Intangible Transition
Property
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or Intangible Transition Charges approved by the Qualified Rate Orders or any
rights thereunder, except such a limitation or alteration may be made by the
Commonwealth of Pennsylvania or the PUC if adequate compensation is made by law
for the full protection of the Intangible Transition Charges and of Transition
Bondholders; and (b) under the Contract Clauses of the Constitutions of the
Commonwealth of Pennsylvania and the United States, the Commonwealth of
Pennsylvania and the PUC cannot take any action that substantially impairs the
rights of the Transition Bondholders unless such action is a reasonable exercise
of the Commonwealth of Pennsylvania's sovereign powers and appropriate to
further a legitimate public purpose, and, under the Takings Clauses of the
Pennsylvania and United States Constitutions, in the event such action
constitutes a permanent appropriation of the property interest of Transition
Bondholders in the Intangible Transition Property and deprives the Transition
Bondholders of their reasonable expectations arising from their investments in
Transition Bonds, unless just compensation, as determined by a court of
competent jurisdiction, is provided to Transition Bondholders. (iv) There is no
order by any court providing for the revocation, alteration, limitation or other
impairment of the Statute, any Qualified Rate Order, the Intangible Transition
Property or the Intangible Transition Charges or any rights arising under
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any of them or which seeks to enjoin the performance of any obligations under
the Qualified Rate Orders. (v) No other approval, authorization, consent, order
or other action of, or filing with, any court, Federal or state regulatory body,
administrative agency or other governmental instrumentality is required in
connection with the creation of the Intangible Transition Property, except those
that have been obtained or made. (vi) Except as disclosed by the Seller to the
Issuer there are no proceedings or investigations pending, or to the Seller's
best knowledge, threatened before any court, Federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Seller or its properties challenging either Qualified Rate Order or the
Statute. (vii) No failure on the Initial Transfer Date or any Subsequent
Transfer Date or any time thereafter to satisfy any condition imposed by the
Statute with respect to the recovery of stranded costs will adversely affect the
creation or sale hereunder of Intangible Transition Property or the right to
collect Intangible Transition Charges.
(e) Assumptions. The assumptions used in calculating Intangible Transition
Charges are reasonable and made in good faith.
(f) Creation of Intangible Transition Property. (i) The Intangible
Transition Property other than the Retained Intangible Transition Property
constitutes a
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current property right, (ii) the Intangible Transition Property includes,
without limitation, (A) the irrevocable right of the Issuer and any Other
Issuers to receive through Intangible Transition Charges an amount sufficient to
recover all of the Seller's Qualified Transition Expenses described in the
Qualified Rate Orders in an amount equal to the aggregate principal amount of
Transition Bonds and Other Transition Bonds plus an amount sufficient to provide
for any credit enhancement (including the Overcollateralization Amount relating
to each Series of Transition Bonds), to fund any reserves, and to pay interest,
premium, if any, servicing fees and other expenses relating to the Transition
Bonds and Other Transition Bonds, and (B) all right, title and interest of the
Seller or its assignee applicable to the Transition Bonds and Other Transition
Bonds in the Qualified Rate Orders and in all revenues, collections, claims,
payments, money or proceeds of or arising from the Intangible Transition Charges
applicable to the Transition Bonds and Other Transition Bonds set forth in the
Qualified Rate Orders to the extent that in accordance with the Statute, the
Qualified Rate Orders and the rates and charges authorized under the Qualified
Rate Orders are declared to be irrevocable and (iii) paragraphs four through
nineteen of each Qualified Rate Order, including the right to collect Intangible
Transition Charges, have been declared to be irrevocable by the PUC.
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(g) Solvency. After giving effect to the sale of any Transferred Intangible
Transition Property hereunder, the Seller (i) is solvent and expects to remain
solvent, (ii) is adequately capitalized to conduct its business and affairs
considering its size and the nature of its business and intended purposes, (iii)
is not engaged in nor does it expect to engage in a business for which its
remaining property represents an unreasonably small capital, (iv) believes that
it will be able to pay its debts as they come due and that such belief is
reasonable and (v) is able to pay its debts as they mature and does not intend
to incur, or believe that it will incur, indebtedness that it will not be able
to repay at its maturity.
(h) Swap Payments. Semiannual fixed amounts payable by the Issuer to a
Counterparty in respect of fixed interest under a Swap Agreement are includable
in Intangible Transition Charges.
ARTICLE IV
Covenants of the Seller
SECTION 4.01. Corporate Existence. Subject to Section 5.02, so long as any
of the Transition Bonds are outstanding, the Seller will keep in full force and
effect its corporate existence and remain in good standing, in each case under
the laws of the jurisdiction of its incorporation, and will obtain and preserve
its
24
qualification to do business in each jurisdiction in which such qualification is
or shall be necessary to protect the validity and enforceability of this
Agreement and the Trust Agreement and each other instrument or agreement to
which the Seller is a party necessary to the proper administration of this
Agreement and the transactions contemplated hereby.
SECTION 4.02. No Liens or Conveyances. Except for the conveyances
hereunder, the Seller will not sell, pledge, assign or transfer to any other
Person, or grant, create, incur, assume or suffer to exist any Lien on, any of
the Intangible Transition Property, whether now existing or hereafter created,
or any interest therein, other than, with respect to Retained Intangible
Transition Property, the Lien of the Mortgage; provided, that the Seller may
sell Retained Intangible Transition Property to Other Issuers if (i) the Rating
Agency Condition is satisfied with respect to all outstanding Transition Bonds
and (ii) each such Other Issuer is, or prior to such sale becomes, a party to
the Master Servicing Agreement as an "Issuer" (as defined in the Master
Servicing Agreement). The Seller shall not at any time assert any Lien against
or with respect to any Serviced Intangible Transition Property, and shall defend
the right, title and interest of the Issuer, the Bond Trustee, as assignee of
the Issuer, and any Other Issuers in, to and under the Intangible Transition
Property, whether now
25
existing or hereafter created, against all claims of third parties claiming
through or under the Seller.
SECTION 4.03. Delivery of Collections. If the Seller receives collections
in respect of the Intangible Transition Charges, other than Intangible
Transition Charges relating to Retained Intangible Transition Property, or the
proceeds thereof, the Seller agrees to pay the Servicer all payments received by
the Seller in respect thereof as soon as practicable after receipt thereof by
the Seller, but in no event later than two Business Days after such receipt.
SECTION 4.04. Notice of Liens. The Seller shall notify the Issuer Trustee
and the Bond Trustee promptly after becoming aware of any Lien on any Intangible
Transition Property other than the conveyances hereunder or under the Indenture,
conveyances to Other Issuers (and related pledges) or, in the case of Retained
Intangible Transition Property, the Lien of the Mortgage.
SECTION 4.05. Compliance with Law. The Seller hereby agrees to comply with
its organizational or governing documents and all laws, treaties, rules,
regulations and determinations of any governmental instrumentality applicable to
the Seller, except to the extent that failure to so comply would not adversely
affect the Issuer's, the Bond Trustee's or any Other Issuer's interests in the
Intangible Transition Property or under any of the Basic Documents or the
Seller's performance of its obligations
26
hereunder or under any of the other Basic Documents to which it is a party.
SECTION 4.06. Covenants Related to Intangible Transition Property. (a) So
long as any of the Transition Bonds are outstanding, the Seller shall treat the
Transition Bonds as debt of the Seller for Federal income tax purposes.
(b) So long as any of the Transition Bonds are outstanding, the Seller
shall (i) clearly disclose in its financial statements that it is not the owner
of the Serviced Intangible Transition Property and that the assets of the Issuer
are not available to pay creditors of the Seller or any of its Affiliates and
(ii) clearly disclose the effects of all transactions between the Seller and the
Issuer in accordance with generally accepted accounting principles.
(c) The Seller agrees that upon the sale by the Seller of the Transferred
Intangible Transition Property to the Issuer pursuant to this Agreement, (i) to
the fullest extent permitted by law, including applicable PUC Regulations, the
Issuer shall have all of the rights originally held by the Seller with respect
to the Transferred Intangible Transition Property (other than the rights of an
electric distribution company set forth in Section 2807 of the Statute),
including the right to collect any amounts payable by any Customer or Third
Party in respect of such Transferred Intangible Transition Property,
27
notwithstanding any objection or direction to the contrary by the Seller and
(ii) any payment by any Customer or Third Party to the Issuer shall discharge
such Customer's or such Third Party's obligations in respect of such Transferred
Intangible Transition Property to the extent of such payment, notwithstanding
any objection or direction to the contrary by the Seller.
(d) So long as any of the Transition Bonds are outstanding, (i) the Seller
shall not make any statement or reference in respect of the Transferred
Intangible Transition Property that is inconsistent with the ownership thereof
by the Issuer and (ii) the Seller shall not take any action in respect of the
Serviced Intangible Transition Property except solely in its capacity as the
Servicer thereof pursuant to the Master Servicing Agreement or as otherwise
contemplated by the Basic Documents.
SECTION 4.07. Notice of Indemnification Events. The Seller shall deliver to
the Issuer and the Bond Trustee promptly after having obtained knowledge
thereof, written notice in an Officers' Certificate of any Indemnification Event
or any event which, with the giving of notice or the passage of time, would
become an Indemnification Event.
SECTION 4.08. Protection of Title. The Seller shall execute and file such
filings, including filings with the PUC pursuant to the Statute, and cause to be
executed
28
and filed such filings, all in such manner and in such places as may be required
by law fully to preserve, maintain, and protect the interests of the Issuer in
the Transferred Intangible Transition Property, including all filings required
under the Statute relating to the transfer of the ownership or security interest
in the Transferred Intangible Transition Property by the Seller to the Issuer.
The Seller shall deliver (or cause to be delivered) to the Issuer file-stamped
copies of, or filing receipts for, any document filed as provided above, as soon
as available following such filing. The Seller agrees to take such legal or
administrative actions, including defending against or instituting and pursuing
legal actions and appearing or testifying at hearings or similar proceedings, as
may be reasonably necessary (i) to protect the Issuer and the Transition
Bondholders from claims, state actions or other actions or proceedings of third
parties which, if successfully pursued, would result in a breach of any
representation or warranty set forth in Article III or (ii) to block or overturn
any attempts to cause a repeal of, modification of or supplement to the Statute
or the Qualified Rate Orders or the rights of holders of Intangible Transition
Property by legislative enactment or constitutional amendment that would be
adverse to the holders of Intangible Transition Property.
29
SECTION 4.09. Taxes. So long as any of the Transition Bonds are
outstanding, the Seller shall, and shall cause each of its subsidiaries (other
than the Issuer) to, pay all material taxes, including gross receipts taxes,
assessments and governmental charges imposed upon it or any of its properties or
assets or with respect to any of its franchises, business, income or property
before any penalty accrues thereon if the failure to pay any such taxes,
assessments and governmental charges would, after any applicable grace periods,
notices or other similar requirements, result in a lien on the Intangible
Transition Property; provided that no such tax need be paid if the Seller or one
of its subsidiaries is contesting the same in good faith by appropriate
proceedings promptly instituted and diligently conducted and if the Seller or
such subsidiary has established appropriate reserves as shall be required in
conformity with generally accepted accounting principles.
ARTICLE V
The Seller
SECTION 5.01. Liability of Seller; Indemnities and Liquidated Damages. (a)
The Seller shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by the Seller under this Agreement.
30
(b) The Seller shall indemnify the Issuer and the Bond Trustee, for itself
and on behalf of the Transition Bondholders, and each of their respective
trustees, officers, directors and agents for, and defend and hold harmless each
such Person from and against, any and all taxes (other than any taxes imposed on
Transition Bondholders solely as a result of their ownership of Transition
Bonds) that may at any time be imposed on or asserted against any such Person as
a result of the acquisition or holding of the Transferred Intangible Transition
Property by the Issuer or the issuance and sale by the Issuer of the Transition
Bonds, including any sales, gross receipts, general corporation, tangible
personal property, privilege or license taxes.
(c)(i) The Seller shall indemnify the Issuer and the Bond Trustee, on
behalf of the Transition Bondholders, each of their respective trustees,
officers, directors, and agents, and any Counterparty, 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 (x)
the Seller's wilful misconduct, bad faith or gross negligence in the performance
of its duties or observance of its covenants under this Agreement, (y) the
Seller's reckless disregard of its obligations and duties under this Agreement
or (z) the Seller's breach of any of its representations or warranties contained
in this
31
Agreement other than those contained in Sections 3.08(b), 3.08(c), 3.08(d)(i),
(ii) and (iv) and 3.08(f) (any event described in any of the foregoing clauses
(x), (y) or (z), an "Indemnification Event"); provided, however, that the amount
of such Losses (other than those payable pursuant to Section 5.01(e)) for which
the Seller shall be obligated to provide indemnification shall not exceed the
Liquidated Damages Amount. Amounts on deposit in the Reserve Subaccount, the
Overcollateralization Subaccount and the Capital Subaccount shall not be
available to satisfy any Losses for which indemnification is provided in this
Agreement.
(ii) If an Indemnification Event shall occur, upon receipt of written
notice thereof by the Seller from the Issuer or the Bond Trustee, the Seller
shall notify the Servicer of the occurrence of such event so that the Servicer
may, pursuant to Section 8 of Annex 1 to the Master Servicing Agreement,
calculate (x) on the day which is 90 days after receipt of such notice by the
Seller (the "Initial Loss Calculation Date") the amount of Losses expected to be
incurred as a result of such Indemnification Event from and including the time
of its occurrence through and including the next Monthly Allocation Date after
the Initial Loss Calculation Date and (y) to the extent that Losses may be
incurred as a result of such Indemnification Event in an amount exceeding the
amount of Losses calculated
32
pursuant to clause (x) above and unless the Seller has paid Liquidated Damages
with respect to such Indemnification Event pursuant to Section 5.01(d)(i)(B),
not later than each Monthly Allocation Date succeeding the Initial Loss
Calculation Date, the amount of Losses expected to be incurred as a result of
such Indemnification Event from but excluding such Monthly Allocation Date
through and including the next Monthly Allocation Date. All such calculations
shall be subject to the approval of the Bond Trustee. If such Indemnification
Event shall continue unremedied beyond the Initial Loss Calculation Date, the
Seller shall pay to the Bond Trustee, as assignee of the Issuer, for deposit
into the General Subaccount of the Collection Account, (x) on the Monthly
Allocation Date immediately following the Initial Loss Calculation Date, the
amount of Losses calculated pursuant to clause (x) and clause (y) of the
preceding sentence with respect to such Monthly Allocation Date and (y) on each
subsequent Monthly Allocation Date, the amount of Losses calculated as of such
date pursuant to clause (y) of the preceding sentence. Upon payment pursuant to
this Section 5.01(c)(ii), the Seller shall have no further obligations with
respect to such Losses to the extent of such payments.
(d)(i) In the event of a breach by the Seller of any representation and
warranty specified in (A) Section 3.08(b), 3.08(c), 3.08(d)(i), (ii) or (iv) or
3.08(f) of
33
this Agreement that has a material adverse effect on the Transition Bondholders
or (B) Sections 3.01, 3.03, 3.04, 3.05 and 3.08(d)(iii), (v) or (vi) of this
Agreement for which the full amount of Losses attributable thereto are
reasonably expected to be incurred beyond a 90-day period immediately following
the occurrence of such Indemnification Event, the Seller shall pay to the Bond
Trustee, as assignee of the Issuer, for deposit into the General Subaccount of
the Collection Account the Liquidated Damages Amount. Such amount shall be paid
(x) in the case of clause (A) above, on the Liquidated Damages Payment Date or
(y) in the case of clause (B) above, on the First Monthly Allocation Date
following the expiration of the 90-day period set forth in such clause (B).
Notwithstanding the foregoing, if the Seller is obligated pursuant to this
Section 5.01(d)(i) to pay amounts for deposit into the General Subaccount of the
Collection Account for a breach of a representation and warranty which relates
to one of the Qualified Rate Orders, but not both of the Qualified Rate Orders,
then the Liquidated Damages Amount will include the then outstanding principal
amount of only the Affected Transition Bonds as of the Liquidated Damages
Redemption Date and unpaid interest accrued thereon.
(ii) The Seller shall not be obligated to pay the Liquidated Damages Amount
pursuant to Section 5.01(d)(i) (A) if (A) within 90 days after the date of the
occurrence
34
thereof such breach is cured or the Seller takes remedial action such that there
is not and will not be a material adverse effect on the Transition Bondholders
as a result of such breach and (B) either (i) if the Seller had, immediately
prior to the breach, a long term debt rating of at least "A3" by ▇▇▇▇▇'▇ and
"BBB" by Standard & Poor's and the equivalent of "BBB" by any other Rating
Agency, the Seller enters into a binding agreement with the Issuer to pay any
amounts necessary so that all interest payments due on the Transition Bonds
during such 90-day period will be paid in full, or (ii) if the Seller does not
have such long term debt ratings, the Seller deposits, within two Business Days
after such breach, an amount in escrow with the Bond Trustee sufficient, taking
into account amounts on deposit in the Collection Account which will be
available for such purpose, to pay all interest payments which will become due
on the Transition Bonds during such 90-day period. In the event that within such
90-day period (i) such breach is cured or (ii) the Seller takes the remedial
action specified by Section 5.01(d)(ii)(A), any amounts paid by the Seller to
the Bond Trustee, as assignee of the Issuer pursuant to Section 5.01(d)(ii)(B),
which have not been distributed pursuant to the Indenture shall be returned to
the Seller at the end of such 90-day period.
(iii) With respect to any Losses described in Section 5.01(c)(ii) or
Section 5.01(d)(i)(B) above, the full
35
amount of which is reasonably expected not to exceed 1/12th of 1% of the annual
outstanding balance of Transition Bonds per Monthly Allocation Date (the "De
Minimis Loss Amount"), the Seller, on the Monthly Allocation Date immediately
following the Initial Loss Calculation Date, shall pay to the Bond Trustee, as
assignee of the Issuer, for deposit in the Loss Subaccount of the Collection
Account, the aggregate expected amount of such Losses for all Monthly Allocation
Dates on which such Losses are expected to be incurred, following which the
Seller's obligation to pay indemnification or Liquidated Damages, as applicable,
as a result of such Losses shall be waived so long as the actual Losses incurred
on any Monthly Allocation Date do not exceed the De Minimis Loss Amount. If the
aggregate amount of such Losses incurred as of any Monthly Allocation Date
exceeds the amounts paid by the Seller to the Bond Trustee, as assignee of the
Issuer, with respect thereto, the Seller shall pay to the Bond Trustee, as
assignee of the Issuer, on the next Monthly Allocation Date, the amount of such
excess for such Monthly Allocation Date and the expected amount of excess for
all subsequent Monthly Allocation Dates.
(iv) Upon the payment by the Seller of the Liquidated Damages
Amount pursuant to Section 5.01(d)(i), neither the Issuer nor any other Person
shall have any other claims, rights or remedies against the Seller for a breach
36
of the representations and warranties specified in Section 3.08(b), (c), (d)(i),
(d)(ii), (d)(iv) or (f).
(e) The Seller shall indemnify the Bond Trustee and the Issuer Trustee and
their respective officers, directors and agents for, and defend and hold
harmless each such Person from and against, any and all Losses that may be
imposed upon, incurred by or asserted against any such Person as a result of the
acceptance or performance of the trusts and duties contained herein and in the
Indenture, except to the extent that any such Loss shall be due to the wilful
misfeasance, bad faith or gross negligence of the Bond Trustee or the Issuer
Trustee, as applicable. Such amounts shall be deposited into the Collection
Account and distributed in accordance with the Indenture.
(f) The Seller's indemnification obligations under Section 5.01(b),(c), (d)
and (e) for events occurring prior to the removal or resignation of the Bond
Trustee or the termination of this Agreement shall survive the resignation or
removal of the Bond Trustee or the termination of this Agreement and shall
include reasonable fees and expenses of investigation and litigation (including
the Bond Trustee's reasonable attorney's fees and expenses).
(g) The Seller shall indemnify each Counterparty for, and defend and hold
harmless each Counterparty from and against, any and all Losses that may be
imposed upon, incurred by or asserted against such Counterparty as a
37
result of breach of the Seller's representations or warranties contained in
Section 3.08(h) of this Agreement. Such amounts shall be deposited into the
Collection Account and distributed in accordance with the Indenture.
SECTION 5.02. Merger or Consolidation of, or Assumption of the Obligations
of, Seller. Any Person (a) into which the Seller may be merged or consolidated
and which succeeds to the major part of the electric distribution business of
the Seller, (b) which results from the division of the Seller into two or more
Persons and which succeeds to the major part of the electric distribution
business of the Seller, (c) which may result from any merger or consolidation to
which the Seller shall be a party and which succeeds to the major part of the
electric distribution business of the Seller, (d) which may succeed to the
properties and assets of the Seller substantially as a whole and which succeeds
to the major part of the electric distribution business of the Seller or (e)
which may otherwise succeed to the major part of the electric distribution
business of the Seller, which Person in any of the foregoing cases executes an
agreement of assumption to perform every obligation of the Seller under this
Agreement, shall be the successor to the Seller hereunder without the execution
or filing of any document or any further act by any of the parties to this
Agreement; provided, however, that (i) immediately after giving effect
38
to such transaction, no representation or warranty made pursuant to Article III
shall have been breached and no Servicer Default, and no event that, after
notice or lapse of time, or both, would become a Servicer Default, shall have
occurred and be continuing, (ii) the Seller shall have delivered to the Issuer
and the Bond Trustee an Officers' Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession and such agreement of
assumption comply with this Section and that all conditions precedent, if any,
provided for in this Agreement relating to such transaction have been complied
with, (iii) the Rating Agencies shall have received prior written notice of such
transaction and (iv) the Seller shall have delivered to the Issuer and the Bond
Trustee an Opinion of Counsel either (A) stating that, in the opinion of such
counsel, all filings, including filings with the PUC pursuant to the Statute,
have been executed and filed that are necessary fully to preserve and protect
the interest of the Issuer in the Transferred Intangible Transition Property and
reciting the details of such filings or (B) stating that, in the opinion of such
counsel, no such action shall be necessary to preserve and protect such
interests. Notwithstanding anything herein to the contrary, the execution of the
above described agreement of assumption and compliance with clauses (i), (ii),
(iii) and (iv) above shall be conditions
39
precedent to the consummation of any transaction referred to
in clauses (a), (b), (c), (d) or (e) above.
SECTION 5.03. Limitation on Liability of Seller and Others. The Seller and
any director or officer or employee or agent of the Seller may rely in good
faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person, respecting any matters arising
hereunder. Subject to Section 5.04, the Seller shall not be under any obligation
to appear in, prosecute or defend any legal action that is not incidental to its
obligations under this Agreement, and that in its opinion may involve it in any
expense or liability.
SECTION 5.04. Opinions of Counsel. The Seller shall deliver to the Issuer
and the Bond Trustee: (a) promptly after the execution and delivery of this
Agreement and of each amendment hereto or to the Master Servicing Agreement and
on each Subsequent Transfer Date, an Opinion of Counsel either (i) to the effect
that, in the opinion of such counsel, all filings, including filings with the
PUC pursuant to the Statute, that are necessary to fully preserve and protect
the interests of the Issuer in the Intangible Transition Property have been
executed and filed, and reciting the details of such filings or referring to
prior Opinions of Counsel in which such details are given, or (ii) to the effect
that, in the opinion of such counsel,
40
no such action shall be necessary to preserve and protect such interest; and (b)
within 90 days after the beginning of each calendar year beginning with the
first calendar year beginning more than three months after the Initial Transfer
Date, an Opinion of Counsel, dated as of a date during such 90-day period,
either (i) to the effect that, in the opinion of such counsel, all filings with
the PUC pursuant to the Statute, have been executed and filed that are necessary
to preserve fully and protect fully the interest of the Issuer in the Intangible
Transition Property, and reciting the details of such filings or referring to
prior Opinions of Counsel in which such details are given, or (ii) to the effect
that, in the opinion of such counsel, no such action shall be necessary to
preserve and protect such interest. Each Opinion of Counsel referred to in
clause (a) or (b) above shall specify any action necessary (as of the date of
such opinion) to be taken in the following year to preserve and protect such
interest.
ARTICLE VI
Miscellaneous Provisions
SECTION 6.01. Amendment. This Agreement may be amended by the Seller and
the Issuer, with the consent of the Bond Trustee and, with respect to any
amendment which would materially adversely affect the rights of any Counterparty
under any Swap Agreement, the consent of each
41
such Counterparty (which consent shall not be unreasonably withheld). The Issuer
shall furnish to each of the Rating Agencies (i) prior to the execution of any
such amendment or consent, written notification of the substance thereof and
(ii) promptly after the execution of any such amendment or consent, a copy
thereof.
Prior to the execution of any amendment to this Agreement, the Issuer and
the Bond Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement and the Opinion of Counsel referred to in Section 5.04(a). The
Issuer and the Bond Trustee may, but shall not be obligated to, enter into any
such amendment which affects their own rights, duties or immunities under this
Agreement or otherwise.
SECTION 6.02. Notices. All demands, notices and communications upon or to
the Seller, the Issuer or the Issuer Trustee, the Bond Trustee or the Rating
Agencies under this Agreement shall be in writing, delivered personally, via
facsimile, reputable overnight courier or by certified mail, return-receipt
requested, and shall be deemed to have been duly given upon receipt (a) in the
case of the Seller, to PECO Energy Company, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇, Attention of Vice President, Finance and Treasurer, (b) in the case of
the Issuer, the Issuer Trustee or any other trustee of the Issuer, at the
Corporate
42
Trust Office, (c) in the case of the Bond Trustee, at the Corporate Trust
Office, (d) in the case of Moody's, to ▇▇▇▇▇'▇ Investors Service, Inc., ABS
Monitoring Department, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, (e) in the
case of Standard & Poor's, to Standard & Poor's Corporation, ▇▇ ▇▇▇▇▇▇▇▇ (▇▇▇▇
▇▇▇▇▇), ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention of Asset Backed Surveillance
Department, (f) in the case of Fitch IBCA, to Fitch IBCA, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention of ABS Surveillance, and (h) in the
case of Duff, to Duff & ▇▇▇▇▇▇ Credit Rating Company, ▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ (▇▇▇▇
▇▇▇▇▇), ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇; or, as to each of the foregoing, at such other
address as shall be designated by written notice to the other parties.
SECTION 6.03. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Section 5.02, this Agreement may not be
assigned by the Seller.
SECTION 6.04. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Seller, the Issuer, the Issuer
Trustee and the Bond Trustee, on behalf of itself and the Transition
Bondholders, and nothing in this Agreement, whether express or implied, shall be
construed to give to any other Person any legal or equitable right, remedy or
claim in the Collateral or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.
43
SECTION 6.05. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 6.06. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 6.07. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 6.08. Governing Law. This Agreement shall be construed in
accordance with the laws of the Commonwealth of Pennsylvania, without reference
to its conflict of law provisions, and the obligations, rights and remedies of
the parties hereunder shall be determined in accordance with such laws.
SECTION 6.09. Assignment to Bond Trustee. The Seller hereby acknowledges
and consents to any mortgage, pledge, assignment and grant of a security
interest by the
44
Issuer to the Bond Trustee pursuant to the Indenture for the benefit of the
Transition Bondholders of all right, title and interest of the Issuer in, to and
under the Transferred Intangible Transition Property and the proceeds thereof
and the assignment of any or all of the Issuer's rights hereunder to the Bond
Trustee. In no event shall The Bank of New York have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer, hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the Issuer.
SECTION 6.10. Nonpetition Covenant. Notwithstanding any prior termination
of this Agreement or the Indenture, but subject to the PUC's rights to order the
sequestration and payment of revenues arising with respect to the 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 Section 2812(d)(3)(v) of the Statute,
the Seller shall not, prior to the date which is one year and one day after the
termination of the Indenture, petition or otherwise invoke or cause the Issuer
to invoke the process of any court or government authority for the purpose of
commencing or sustaining a case against the Issuer under any Federal or state
bankruptcy, insolvency or similar law or appointing a
45
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or any substantial part of the property of the
Issuer, or ordering the winding up or liquidation of the affairs of the Issuer.
SECTION 6.11. Limitation of Liability of Issuer Trustee. Notwithstanding
anything contained herein to the contrary, this Agreement has been countersigned
by First Union Trust Company, National Association not in its individual
capacity but solely in its capacity as Issuer Trustee of the Issuer and in no
event shall First Union Trust Company, National Association in its individual
capacity have any liability for warranties, covenants, agreements or other
obligations of the Issuer hereunder or in any of the certificates, notices or
agreements delivered pursuant hereto, as to all of which recourse shall be had
solely to the assets of the Issuer. For all purposes of this Agreement, in the
performance of its duties or obligations hereunder or in the performance of any
duties or obligations of the Issuer hereunder, the Issuer Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII, VIII and IX of the Trust Agreement.
SECTION 6.12. Perfection. In accordance with Section 2812(e) of the
Statute, upon the execution and delivery of this Agreement and the related ▇▇▇▇
of Sale, the transfer of the Initial Intangible Transition Property will
46
be perfected as against all third persons, including any judicial lien
creditors, and upon the execution and delivery of a ▇▇▇▇ of Sale and, if
applicable, a supplement to this Agreement, a transfer of Subsequent Intangible
Transition Property will be perfected against all third persons,
including any judicial lien creditors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
PECO ENERGY TRANSITION TRUST,
by First Union Trust
Company, National
Association, not in its
individual capacity but
solely as Issuer Trustee
on behalf of the Trust,
by
-------------------------
Title:
PECO ENERGY COMPANY, Seller,
by
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Title:
47
Acknowledged and Accepted:
THE BANK OF NEW YORK, not
in its individual capacity
but solely as Bond Trustee
on behalf of the Transition
Bondholders,
by
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Title: