TRANSITION PROPERTY SERVICING AGREEMENT
between
CPL TRANSITION FUNDING LLC
Note Issuer
and
CENTRAL POWER AND LIGHT COMPANY
Servicer
Dated as of ___________________, 2000
TABLE OF CONTENTS
Page
ARTICLE I.........................................DEFINITIONS 1
ARTICLE II.......................APPOINTMENT AND AUTHORIZATION 2
SECTION 2.01. Appointment of Servicer; Acceptance of Appointment..2
SECTION 2.02. Authorization.......................................2
SECTION 2.03. Dominion and Control Over the Transition Property...2
ARTICLE III...................................BILLING SERVICES 3
SECTION 3.01. Duties of Servicer..................................3
SECTION 3.02. Servicing and Maintenance Standards.................4
SECTION 3.03. Certificate of Compliance...........................5
SECTION 3.04. Annual Report by Independent Public Accountants.....5
ARTICLE IV.............SERVICES RELATED TO TRUE-UP ADJUSTMENTS 6
SECTION 4.01. True-Up Adjustments.................................6
SECTION 4.02. Limitation of Liability..............................8
SECTION 4.03 Monitoring of Third-Party Collectors............ ....9
ARTICLE V.............................THE TRANSITION PROPERTY 11
SECTION 5.01. Custody of Transition Property Records..............11
SECTION 5.02. Duties of Servicer as Custodian.....................11
SECTION 5.03. Instructions; Authority to Act......................12
SECTION 5.04. Custodian's Indemnification.........................12
SECTION 5.05. Effective Period and Termination....................13
ARTICLE VI........................................THE SERVICER 13
SECTION 6.01. Representations and Warranties of Servicer...........13
SECTION 6.02. Indemnities of Servicer; Release of Claims..........15
SECTION 6.03. Merger or Consolidation of, or Assumption of the
Obligations of,Servicer..............................16
SECTION 6.04. Limitation on Liability of Servicer and Others.......17
SECTION 6.05. CPL Not to Resign as Servicer.......................17
SECTION 6.06. Servicing Compensation..............................17
SECTION 6.07. Compliance with Applicable Law......................18
SECTION 6.08. Access to Certain Records and Information
Regarding Transition Property.......................18
SECTION 6.09. Appointments........................................18
SECTION 6.10. No Servicer Advances................................19
SECTION 6.11. Remittances.........................................19
SECTION 6.12. Maintenance of Operations...........................20
ARTICLE VII............................................DEFAULT 20
SECTION 7.01. Servicer Default....................................20
SECTION 7.02. Appointment of Successor............................22
SECTION 7.03. Waiver of Past Defaults.............................22
SECTION 7.04. Notice of Servicer Default..........................22
ARTICLE VIII...........................MISCELLANEOUS PROVISIONS 23
SECTION 8.01. Amendment............................................23
SECTION 8.02. Maintenance of Accounts and Records.................24
SECTION 8.03. Notices.............................................24
SECTION 8.04. Assignment..........................................25
SECTION 8.05. Limitations on Rights of Others.....................25
SECTION 8.06. Severability........................................25
SECTION 8.07. Separate Counterparts...............................25
SECTION 8.08. Headings............................................25
SECTION 8.09. Governing Law.......................................25
SECTION 8.10. Assignment to Indenture Trustee.....................25
SECTION 8.11. Nonpetition Covenants...............................25
SECTION 8.12. Limitation of Liability.............................26
EXHIBITS AND SCHEDULES
Exhibit A Form of Monthly Servicer's Certificate
Exhibit B Form of Certificate of Compliance
Exhibit C Form of Annual True-Up Mechanism
Advice Letter
Exhibit D Form of Interim True-Up Mechanism
Advice Letter
Exhibit E Form of Servicer Certificate
Schedule 4.01(a) Expected Amortization Schedule
Schedule 6.01(f) No Proceedings
ANNEXES
Annex I.. Servicing Procedures
This TRANSITION PROPERTY SERVICING AGREEMENT (this
"Agreement"), dated as of ____________, 2000, is between CPL Transition Funding
LLC, a Delaware limited liability company (the "Note Issuer"), and Central Power
and Light Company, a Texas corporation, as Servicer (the "Servicer").
RECITALS
WHEREAS, pursuant to the Securitization Law and the Initial
Financing Order, the Seller and the Note Issuer are concurrently entering into
the Sale Agreement pursuant to which the Seller is selling and the Note Issuer
is purchasing certain Transition Property created pursuant to the Securitization
Law and the Initial Financing Order described therein, and the Seller may sell
other Transition Property to the Note Issuer pursuant to the Sale Agreement.
WHEREAS, in connection with its ownership of the Transition
Property and in order to collect the associated Transition Charges, the Note
Issuer 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 Note Issuer desires to engage the
Servicer to act on its behalf in obtaining Annual True-Up Adjustments and
Interim True-Up Adjustments from the PUCT. The Servicer desires to perform all
of these activities on behalf of the Note Issuer.
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) Unless otherwise defined herein, capitalized terms used
herein shall 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 [ ], as the Indenture Trustee, as the same may be amended,
supplemented or otherwise modified from time to time.
(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.
(e) Non-capitalized terms used herein which are defined in the
Utilities Code shall, as the context requires, have the meanings assigned to
such terms in the Utilities Code, but without giving effect to amendments to the
Utilities Code after the date hereof which have a material adverse effect on the
Note Issuer or the Holders.
ARTICLE II
APPOINTMENT AND AUTHORIZATION
SECTION 2.01. Appointment of Servicer; Acceptance of
Appointment. Subject to Section 6.05 and Article VII, the Note Issuer hereby
appoints the Servicer, and the Servicer hereby accepts such appointment, to
perform the Servicer's obligations pursuant to this Agreement on behalf of and
for the benefit of the Note Issuer 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 Transition Property, the Servicer shall be, and hereby is,
authorized and empowered by the Note Issuer to (a) execute and deliver, on
behalf of itself and/or the Note Issuer, as the case may be, any and all
instruments, documents or notices, and (b) on behalf of itself and/or the Note
Issuer, as the case may be, make any filing and participate in proceedings of
any kind with any Governmental Authority, including with the PUCT. The Note
Issuer shall execute and deliver to the Servicer such documents as have been
prepared by the Servicer for execution by the Note Issuer and shall furnish the
Servicer with such other documents as may be in the Note Issuer's possession, in
each case as the Servicer may determine to be necessary or appropriate to enable
it to carry out its servicing and administrative duties hereunder. Upon the
Servicer's written request, the Note Issuer shall furnish the Servicer with any
powers of attorney or other documents necessary or appropriate to enable the
Servicer to carry out its duties hereunder.
SECTION 2.03. Dominion and Control Over the Transition
Property. Notwithstanding any other provision herein, the Note Issuer shall have
dominion and control over the Transition Property, and the Servicer, in
accordance with the terms hereof, is acting solely as the servicing agent and
custodian for the Note Issuer with respect to the Transition Property and the
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 materially impair the rights of the Note
Issuer in the 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 Note Issuer, shall have the following duties:
(a) Duties of Servicer Generally. The Servicer's duties in
general shall include management, servicing and administration of the
Transition Property; obtaining meter reads, calculating usage
(including demand and including any such usage by Customers served by a
REP), billing, collections and posting of all payments in respect of
the Transition Property; responding to inquiries by Customers, REPs,
the PUCT, or any other Governmental Authority with respect to the
Transition Property; delivering Bills to Customers and REPs,
investigating and handling delinquencies, processing and depositing
collections and making periodic remittances; furnishing periodic
reports to the Note Issuer, the Indenture Trustee and the Rating
Agencies; making all filings with the PUCT as may be necessary to
perfect the Note Issuer's ownership interests in and the Indenture
Trustee's lien on the Transition Property, and taking all necessary
action in connection with True-Up Adjustments as set forth herein.
Certain of the duties set forth above may be performed by REPs pursuant
to REP Service Agreements. Anything to the contrary notwithstanding,
the duties of the Servicer set forth in this Agreement shall be
qualified in their entirety by any PUCT Regulations as in effect at the
time such duties are to be performed. Without limiting the generality
of this Section 3.01(a), in furtherance of the foregoing, the Servicer
hereby agrees that it shall also have, and shall comply with, the
duties and responsibilities relating to data acquisition, usage and
▇▇▇▇ calculation, billing, customer service functions, collections,
payment processing and remittance set forth in Annex I hereto, as it
may be amended from time to time. For the avoidance of doubt, the term
usage when used herein refers to both kilowatt hour consumption and
kilowatt demand.
(b) Reporting Functions.
(i) Monthly Servicer's Certificate. On or before the
[_________] calendar day of each month (or if such day is not
a Servicer Business Day, on the immediately preceding Servicer
Business Day), the Servicer shall prepare and deliver to 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 TC Payments received by the Servicer
during the Collection Period immediately preceding such date.
(ii) Notification of Laws and Regulations. The Servicer
shall immediately notify the Note Issuer, the Indenture
Trustee and the Rating Agencies in writing of any Requirements
of Law or PUCT 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
Note Issuer, the Indenture Trustee or any Rating Agency, the
Servicer shall provide to the Note Issuer, the Indenture
Trustee or such Rating Agency, as the case may be, any public
financial information in respect of the Servicer, or any
material information regarding the Transition Property to the
extent it is reasonably available to the Servicer, as may be
reasonably necessary and permitted by law to enable the Note
Issuer, the Indenture Trustee or the Rating Agencies to
monitor the performance by the Servicer hereunder. In
addition, so long as any of the Notes of any Series are
outstanding, the Servicer shall provide 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
Transition Charges applicable to each TC Customer Class.
(iv) Preparation of Reports to be Filed with the SEC. The
Servicer shall prepare any reports required to be filed by the
Note Issuer under the securities laws, including a copy of
each 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 Note Issuer, the Servicer shall (a) manage, service, administer and make
collections in respect of the Transition Property with reasonable care and in
accordance with applicable Requirements of Law, including all applicable PUCT
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; (b) follow customary standards, policies and procedures
for the industry in performing its duties as Servicer; (c) use all reasonable
efforts, consistent with its customary servicing procedures, to enforce, and
maintain rights in respect of, the Transition Property and to ▇▇▇▇ and collect
the Transition Charges; (d) comply with all Requirements of Law including all
applicable PUCT Regulations and guidelines, applicable to and binding on it
relating to the Transition Property; and (e) file all PUCT notices described in
the Securitization Law and file and maintain the effectiveness of UCC financing
statements with respect to the property transferred from time to time under the
Sale Agreement. The Servicer shall follow such customary and usual practices and
procedures as it shall deem necessary or advisable in its servicing of all or
any portion of the Transition Property, which, in the Servicer's judgment, may
include the taking of legal action, at the Note Issuer's expense but subject to
the priority of payment set forth in Section 8.02(d) of the Indenture.
SECTION 3.03. Certificate of Compliance. The Servicer shall
deliver to the Note Issuer, the Indenture Trustee and the Rating Agencies on or
before [June 30] of each year, commencing [June 30, 2001] to and including the
[June 30] 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 [March 31] (or, in the case of the first Certificate
of Compliance to be delivered on or before [June 30, 2001] , the period of time
from the date of this Agreement until [March 31, 2001]) and of its performance
under this Agreement has been made under such officer's supervision, and (ii) to
the best of such officer's 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 [June 30, 2001], the period of time from the date
of this Agreement until [March 31, 2001]), or, if there has been a material
default in the fulfillment of any such obligation, specifying each such 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 partial 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 the Seller) to prepare, and
the Servicer shall deliver to 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 Note Issuer, the Indenture
Trustee and the Rating Agencies on or before [June 30] of each year, beginning
[June 30, 2001] to and including the [June 30] succeeding the Retirement of the
Notes, to the effect that such firm has performed certain procedures, agreed
between the Servicer and such accountants, in connection with the Servicer's
compliance with its obligations under this Agreement during the preceding twelve
months ended [March 31] (or, in the case of the first Annual Accountant's Report
to be delivered on or before [June 30, 2001], the period of time from the date
of this Agreement until [March 31, 2001]), identifying the results of such
procedures and including any exceptions noted. In the event such accounting firm
requires the Indenture Trustee to agree or consent to the procedures performed
by such firm, the Note Issuer shall 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 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.
ARTICLE IV
SERVICES RELATED TO TRUE-UP ADJUSTMENTS
SECTION 4.01. True-Up Adjustments. From time to time, until
the Retirement of the Notes, the Servicer shall identify the need for Annual
True-Up Adjustments, Interim True-Up Adjustments and Special True-Up Adjustments
and shall take all reasonable action to obtain and implement such 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 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. 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 Note Issuer, the Indenture Trustee and the
Rating Agencies promptly thereafter.
(b) True-Up Adjustments.
(i) Annual True-Up Adjustments and Filings. Each year
no later than [_________], the Servicer shall: (A) update the
data and assumptions underlying the calculation of the
Transition Charges, including projected electricity usage
during the next Calculation Period for each TC Customer Class
and including interest and estimated expenses and fees of the
Note Issuer to be paid during such period, the Weighted
Average Days Outstanding and write-offs; (B) determine the
Periodic Payment Requirements and Periodic Billing Requirement
for the next Calculation Period based on such updated data and
assumptions; (C) determine the Transition Charges to be
allocated to each TC Customer Class during the next
Calculation Period based on such Periodic Billing Requirement
and the terms of the applicable Financing Orders and the
Tariffs filed pursuant thereto; (D) make all required notice
and other filings with the PUCT to reflect the revised
Transition Charges, including any Amendatory Tariffs, and (E)
take all reasonable actions and make all reasonable efforts to
effect such Annual True-Up Adjustment and to enforce the
provisions of the Securitization Law and the applicable
Financing Orders. The Servicer shall implement the revised
Transition Charges, if any, resulting from such Annual True-Up
Adjustment as of the Annual True-Up Adjustment Date.
(ii) Interim True-Up Adjustments and Filings. Each
year no later than [____] Servicer Business Days prior to each
Payment Date, the Servicer shall compare the anticipated
Unrecovered Balance, as of such Payment Date and after giving
effect to payments to be made on such Payment Date, to the
Projected Unrecovered Balance as of such Payment Date. If the
Servicer determines that such Unrecovered Balance will exceed
105% of such Projected Unrecovered Balance and will be less
than 95% of such Projected Unrecovered Balance and if any
Outstanding Series of Notes which matures after ___, 20__,
will not have been paid in full by its Expected Final Payment
Date, then the Servicer shall: (A) update the data and
assumptions underlying the calculation of the Transition
Charges, including projected electricity usage during the next
Calculation Period for each TC Customer Class and including
interest and estimated expenses and fees of the Note Issuer to
be paid during such period, the rate of delinquencies and
write-offs; (B) determine the Periodic Payment Requirement and
Periodic Billing Requirement for the next Calculation Period
based on such updated data and assumptions; (C) determine the
Transition Charges to be allocated to each TC Customer Class
during the next Calculation Period based on such Periodic
Billing Requirement and the terms of the applicable Financing
Orders and the Tariffs filed pursuant thereto; (D) make all
required notice and other filings with the PUCT to reflect the
revised Transition Charges, including any Amendatory Tariffs,
and (E) take all reasonable actions and make all reasonable
efforts to effect such Interim True-Up Adjustment and to
enforce the Securitization Law and the applicable Financing
Orders. The Servicer shall implement the revised Transition
Charges, if any, resulting from such Interim True-Up
Adjustment on the Interim True-Up Adjustment Date.
(iii) Special True-Up Adjustments and Filings. In the
event that a Special True-Up Adjustment is required pursuant
to an order of the PUCT which has become final, the Servicer
will recalculate the Transition Charges to reallocate such
Transition Charges among TC Customer Classes in accordance
with the requirements of such order and shall implement the
revised Transition Charges resulting from such Special True-Up
Adjustment within 45 days of such order becoming final and
nonappealable.
(c) Reports.
(i) Notification of Amendatory Tariff Filings and
True-Up Adjustments. Whenever the Servicer files an Amendatory
Tariff with the PUCT or implements revised Transition Charges
with notice to the PUCT without filing an Amendatory Tariff if
permitted by any applicable Financing 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 Note Issuer, the
Indenture Trustee and the Rating Agencies concurrently
therewith. If, for any reason any revised Transition Charges
are not implemented and effective on the applicable date set
forth herein, the Servicer shall notify the Note Issuer the
Indenture Trustee and each Rating Agency by the end of the
Second Servicer Business Day after such applicable date.
(ii) 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 E hereto (the "Servicer's Certificate") to the
Note Issuer, the Indenture Trustee and the Rating Agencies.
(iii) Reports to Customers.
(A) After each revised Transition Charge has gone
into effect pursuant to a True-Up Adjustment, the Servicer
shall, to the extent and in the manner and time frame required
by applicable PUCT Regulations, if any, cause to be prepared
and delivered to Customers any required notices announcing
such revised Transition Charges.
(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
Applicable REPs or Customers) cause to be prepared and
delivered to REPs and such Customers a notice stating, in
effect, that the Transition Property and the Transition
Charges are owned by the Note Issuer and not the Seller. The
Servicer shall cause each Applicable REP, at least once each
year, to include similar notices in the bills sent by
Applicable REPs to Customers indicating additionally that the
Transition Charges are not owned by the REP. 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 REP may from time to time use to communicate with
their respective customers.
(C) Except to the extent that applicable PUCT
Regulations make the Applicable REP responsible for such
costs, or the Applicable REP 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 printing and postage costs as the
same may increase or decrease from time to time.
(iv) REP Reports. The Servicer shall provide to the
Rating Agencies, upon request, any publicly available reports
filed by the Servicer with the PUCT (or otherwise made
publicly available by the Servicer) relating to REPs and any
other non-confidential and non-proprietary information
relating to REPs reasonably requested by the Rating Agencies.
SECTION 4.02. Limitation of Liability. (a) The Note Issuer
and the Servicer expressly agree and acknowledge that:
(i) In connection with any True-Up Adjustment, the Servicer is
acting solely in its capacity as the servicing agent hereunder.
(ii) Neither the Servicer nor the Note Issuer is 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 applications required by Section 4.01 in a timely
and correct manner or other breach by the Servicer of its duties under
this Agreement that adversely affects Transition Property or the the
True-Up Adjustments), by the PUCT in any way related to the Transition
Property or in connection with any True-Up Adjustment, the subject of
any filings under Section 4.01, any proposed True-Up Adjustment, or the
approval of any revised Transition Charges and the scheduled
adjustments thereto.
(iii) The Servicer shall have no liability whatsoever relating
to the calculation of any revised Transition Charges and the scheduled
adjustments thereto, including as a result of any inaccuracy of any of
the assumptions made in such calculation regarding expected energy
usage volume and the Weighted Average Days Outstanding, write-offs and
estimated expenses and fees of the Note Issuer, 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
Servicer is liable under Section 6.02.
(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, implement such procedures and policies as are
necessary to ensure that the obligations of all Third-Party Collectors to remit
TC Payments are properly enforced in accordance with the terms and provisions of
the Tariffs, and any other applicable PUCT 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 PUCT Regulations or other applicable law, the
Servicer shall:
(i) maintain adequate records for promptly
identifying and contacting each such Third-Party Collector
(including any Applicable REP);
(ii) maintain records of end-user Customers which are
billed by Applicable REPs to permit prompt transfer of billing
responsibilities in the event of default by such Applicable
REPs;
(iii) maintain adequate records for enforcing
compliance with all REP Deposit Requirements; and
[Others to be determined].
The Servicer shall update the records described above no less
frequently than [quarterly].
(b) Monitoring of Performance and Payment. In addition to any
actions required by PUCT Regulations or other applicable law, the
Servicer shall undertake to do the following:
(i) The Servicer shall require each REP to pay all
Transition Charges billed to such REP in accordance with the
provisions of the Initial Tariff and each Subsequent Tariff
(whether or not disputed). The Servicer shall monitor
compliance by each REP with all REP Remittance Requirements
and take prompt action to enforce such requirements.
(ii) The Servicer shall, consistent with its
customary billing practices, ▇▇▇▇ each REP who provides
consolidated billing to end-user Customers for all Transition
Charges owed by such end-user Customers no less frequently
then the billing cycle otherwise applicable to such end-user
Customers.
[Others to be determined]
(c) Enforcement. The Servicer shall, in accordance with the
terms of the Initial Tariff and each Subsequent Tariff, ensure that
each REP remits all TC Payments which it is obligated to remit to the
Servicer. In the event of any default by any REP, the Servicer shall
enforce all rights set forth in, and take all other steps permitted by,
the Initial Tariff or any Subsequent Tariff or other PUCT Regulations
as it determines, in accordance with the Servicing Standard, are
reasonably necessary to ensure the prompt payment of TC Payments by
such REP and to preserve the rights of the Holders with respect
thereto, including, where appropriate, terminating the right of any REP
to ▇▇▇▇ and collect Transition Charges or petitioning the PUCT to
impose such other remedies or penalties as may be available under the
circumstances.
(d) Credit and Collection Policies.
The Servicer shall, to the full extent permitted
under the Initial Financing Order or any Subsequent Financing
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 the
Utilities Code and the terms of the Initial Financing Order
and any Subsequent Financing Order, include and impose the
above-described terms in all tariffs filed under the Utilities
Code which would allow REPs or other utilities to issue single
bills to CPL's Customers which include Transition Charges. The
Servicer shall periodically review the need for modified or
additional terms based upon, among other things, (i) the
relative amount of TC Payments received through REPs relative
to the Periodic Billing Requirement, (ii) the historical
payment and default experience of each REP and (iii) such
other credit and collection policies to which the REPs are
subject, and if permitted by applicable law, will set out any
such modified or additional terms in a supplemental tariff
filed with the PUCT.
ARTICLE V
THE TRANSITION PROPERTY
SECTION 5.01. Custody of Transition Property Records. To
assure uniform quality in servicing the Transition Property and to reduce
administrative costs, the Note Issuer hereby revocably appoints the Servicer,
and the Servicer hereby accepts such appointment, to act as the agent of the
Note Issuer and the Indenture Trustee as custodian of any and all documents and
records that the Seller shall keep on file, in accordance with its customary
procedures, relating to the Transition Property, including copies of any
Financing Orders, Issuance Advice Letters, Tariffs and Amendatory Tariffs
relating thereto and all documents filed with the PUCT in connection with any
True-Up Adjustment and computational records relating thereto (collectively, the
"Transition Property Records"), which are hereby constructively delivered to the
Indenture Trustee, as pledgee of the Note Issuer (or, in the case of the
Subsequent Transition Property, will as of the applicable Subsequent Transfer
Date be constructively delivered to the Indenture Trustee, as pledgee of the
Note Issuer) with respect to all Transition Property.
SECTION 5.02. Duties of Servicer as Custodian. (a)
Safekeeping. The Servicer shall hold the Transition Property Records on behalf
of the Note Issuer and maintain such accurate and complete accounts, records and
computer systems pertaining to the Transition Property Records as shall enable
the Note Issuer and the Indenture Trustee, as applicable, to comply with this
Agreement, the Sale Agreement and the Indenture. 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 Note Issuer, the Indenture Trustee and the
Rating Agencies any failure on its part to hold the 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 Note
Issuer or the Indenture Trustee of the Transition Property Records. The
Servicer's duties to hold the Transition Property Records on behalf of the Note
Issuer and the Indenture Trustee set forth in this Section 5.02, to the extent
such Transition Property Records have not been previously transferred to a
successor Servicer pursuant to Article VII, shall terminate one year and one day
after the earlier of the date on which (i) the Servicer is succeeded by a
successor Servicer in accordance with Article VII and (ii) no Notes of any
Series are Outstanding.
(b) Maintenance of and Access to Records. The Servicer shall
maintain the Transition Property Records at [_______________] or at such other
office as shall be specified to the Note Issuer and the Indenture Trustee by
written notice at least 30 days prior to any change in location. The Servicer
shall make available for inspection to the Note Issuer and the Indenture Trustee
or their respective duly authorized representatives, attorneys or auditors the
Transition Property Records at such times during normal business hours as 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 PUCT 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 5.02(b).
(c) Release of Documents. Upon instruction from the Indenture
Trustee in accordance with the Indenture, the Servicer shall release any
Transition Property Records to the Indenture Trustee, the Indenture Trustee's
agent or the Indenture Trustee's designee, as the case may be, at such place or
places as the Indenture Trustee may designate, as soon as practicable.
(d) Defending Transition Property Against Claims. The
Servicer, on behalf of the Holders, shall institute any action or proceeding
necessary to compel performance by the PUCT or the State of Texas of any of
their respective obligations or duties under the Securitization Law, any
Financing Order, any Issuance Advice Letter, True-Up Adjustment, any Tariff or
any Amendatory 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 reasonably necessary to block or overturn any attempts to cause a repeal
of, modification of or supplement to or judicial invalidation of the
Securitization Law or any Financing Order or the rights of holders of Transition
Property by legislative enactment, voter initiative or constitutional amendment
that would be materially adverse to Holders. The costs of any such action shall
be payable from TC Collections as Operating Expenses 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 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 Note Issuer, the Independent Managers and the
Indenture Trustee (for itself and for the benefit of the Noteholders) 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 each such Person as the result of any
negligent act or omission in any way relating to the maintenance and custody by
the Servicer, as custodian, of the 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 Note Issuer, the Independent Managers or the Indenture Trustee, as the case
may be.
Indemnification under this Section shall survive resignation
or removal of the Indenture Trustee or any Independent Manager and shall include
reasonable out-of-pocket fees and expenses of investigation and litigation
(including reasonable attorney's fees and expenses).
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 25 percent 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.
Additionally, if not sooner terminated as provided above, the Servicer's
obligations as Custodian shall terminate one year and one day after the date on
which no Notes of any Series are Outstanding.
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 Transfer Date relating to the sale of Subsequent
Transition Property, and as of such other dates as expressly provided in this
Section 6.01, on which the Note Issuer and the Indenture Trustee are deemed to
have relied in entering into this Agreement relating to the servicing of the
Transition Property. The representations and warranties shall survive the
execution and delivery of this 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 and is in good standing under the laws
of the state of its organization, with the requisite corporate or other
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 Transition Property and to
hold the Transition Property Records as custodian.
(b) Due Qualification. The Servicer is duly qualified to do
business and is in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business (including the
servicing of the Transition Property as required by this Agreement)
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 Servicer's business, operations, assets,
revenues or properties or materially adversely affect the servicing of
the Transition Property).
(c) Power and Authority. The Servicer has the requisite
corporate or other power and authority to execute and deliver this
Agreement and to carry out its terms; and the execution, delivery and
performance of this Agreement have been duly authorized by all
necessary action on the part of the Servicer order its organizational
or governing documents and laws.
(d) Binding Obligation. This Agreement constitutes a legal,
valid and binding obligation of the Servicer enforceable against the
Servicer in accordance with its terms, subject to applicable
insolvency, reorganization, moratorium, fraudulent transfer and other
laws relating to or affecting creditors' rights generally from time to
time in effect and to general principles of equity (including concepts
of materiality, reasonableness, good faith and fair dealing),
regardless of whether considered in a proceeding in equity or at law.
(e) 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 organization and documents of the Servicer, or any
material indenture, agreement or other instrument to which the Servicer
is a party or by which it or any of its property is bound; nor 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; nor violate any existing law or any existing order, rule or
regulation applicable to the Servicer of any Governmental Authority
having jurisdiction over the Servicer or its properties, so as to
adversely affect the Servicer's ability to perform its obligations
under this Agreement Holders.
(f) No Proceedings. [Except as set forth on Schedule 6.01(f)],
there are no proceedings or investigations pending or, to the
Servicer's knowledge, threatened, before any Governmental Authority
having jurisdiction over the Servicer or its properties involving or
relating to the Servicer or the Note Issuer or, to the Servicer's
knowledge, any other Person: (i) asserting the invalidity of this
Agreement or any of the other Basic Documents, (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 income tax or
state income or franchise tax attributes of the Notes as debt.
(g) Approvals. No approval, authorization, consent, order or
other action of, or filing with, any Governmental Authority is required
in connection with the execution and delivery by the Servicer of this
Agreement, the performance by the Servicer of the transactions
contemplated hereby or the fulfillment by the Servicer of the terms
hereof, except those that have been obtained or made and those that the
Servicer is required to make in the future pursuant to Article IV.
(h) Reports and Certificates. Each report and certificate
delivered in connection with an Issuance Advice Letter will constitute
a representation and warranty by the Servicer that each such report or
certificate, as the case may be, is true and correct in all material
respects; provided, however, that to the extent any such report or
certificate is based in part upon or contains assumptions, forecasts or
other predictions of future events, the representation and warranty of
the Servicer with respect thereto will be limited to the representation
and warranty that such assumptions, 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 Note Issuer, the
Indenture Trustee (for itself and for the benefit of the Noteholders) and the
Independent Managers 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 imposed on, incurred by 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 in any material respect of any of its representations
and warranties contained in this Agreement except to the extent of Losses either
resulting from the willful misconduct, bad faith or gross negligence of such
Person seeking indemnification hereunder or resulting from a breach of a
representation or warranty made by such Person in any of the Basic Documents
that gives rise to the Servicer's breach.
(c) For purposes of Section 6.02(b), in the event of the
termination of the rights and obligations of CPL (or any successor thereto
pursuant to Section 6.03) as Servicer pursuant to 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, or supplement to, or judicial invalidation of, the
Securitization Law or any Financing Order and shall survive the resignation or
removal of the Indenture Trustee or any Independent Manager or the termination
of this Agreement and shall include reasonable out-of-pocket fees and expenses
of investigation and litigation (including reasonable attorney's fees and
expenses).
(e) Except to the extent expressly provided in this Agreement
or the other Basic Documents (including the Servicer's claims with respect to
the Servicing Fee, reimbursement for any Excess Remittance, reimbursement for
costs incurred pursuant to Section 5.02 (d) and the payment of the purchase
price of Transition Property), the Servicer hereby releases and discharges the
Note Issuer, the Independent Managers, 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 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, Conversion or Consolidation of, or
Assumption of the Obligations of, Servicer. Any Person (a) into which the
Servicer may be merge, converted d or consolidated and which, (b) that may
result from any merger, conversion or consolidation to which the Servicer shall
be a party and which (c) that may succeed to the properties and assets of the
Servicer and which (d) which results from the division of the Servicer into two
or more Persons and which (e) which otherwise succeeds to the major part of the
electric transmission and distribution business of the Servicer (or, if
transmission and distribution are not provided by a single entity, which
provides wire service directly to customers taking service at facilities,
premises or loads located in CPL's certificated service area as it existed on
May 1, 1999), which Person in any of the foregoing cases executes an agreement
of assumption to perform all of the obligations 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 Note Issuer, conversion, and the Indenture Trustee and each
Rating Agency an Officer's Certificate and an Opinion of Counsel stating that
such consolidation, merger, division or succession and such agreement of
assumption complies 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 Servicer shall have delivered to the Note Issuer and the
Indenture Trustee an Opinion of Counsel either (A) stating that, in the opinion
of such counsel, all filings to be made by the Servicer, including filings with
the PUCT pursuant to the Securitization Law, have been executed and filed that
are necessary to fully preserve and protect the interests of the Note Issuer in
the Transition Property and reciting the details of such filings or (B) stating
that, in the opinion of such counsel, no such action shall be necessary to
preserve and protect such interests and (iv) the Servicer shall have given the
Rating Agencies prior written notice of such transaction. When any Person (or
more than one Person) acquires the properties and assets of the Servicer
substantially as a whole or otherwise becomes the successor, by merger,
conversion, consolidation, sale, transfer, lease or otherwise, to the electric
transmission and distribution business of the Servicer (or, if transmission and
distribution are not provided by a single entity, provides wire service directly
to customers taking servcices at facilities, premises or loads located in CPL's
Certificated Service area as it existed on May 1, 1999) in accordance with the
terms of this Section 6.03, then upon satisfaction of all of the other
conditions of this Section, the Servicer shall automatically and without further
notice be released from all its obligations hereunder.
SECTION 6.04. Limitation on Liability of Servicer and Others.
Except as otherwise provided under this Agreement, neither the Servicer nor any
of the directors, officers, employees or agents of the Servicer shall be liable
to the Note Issuer or any other Person 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 otherwise be imposed by
reason of willful misconduct, bad faith or gross negligence in the performance
of duties or by reason of reckless disregard of obligations and duties under
this Agreement. The Servicer and any director, officer, 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.
Except as provided in this Agreement, the Servicer shall not
be under any obligation to appear in, prosecute or defend any legal action
relating to the Transition Property.
SECTION 6.05. CPL Not to Resign as Servicer. Subject to the
provisions of Section 6.03, CPL 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 or (b) satisfaction of the
following: (i) the Rating Agency Condition shall have been satisfied except that
with respect to Moody's it shall be sufficient to provide ten days' prior notice
and (ii) to the extent required under any Financing Order, the PUCT shall have
approved such resignation. Notice of any such determination permitting the
resignation of CPL shall be communicated to 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 that the performance of CPL's
duties under this Agreement shall no longer be permissible under applicable law
shall be evidenced by an Opinion of Counsel to such effect delivered by CPL to
the Note Issuer and the Indenture Trustee concurrently with or promptly after
such notice. No such resignation shall become effective until a successor
Servicer shall have assumed the responsibilities and obligations of CPL 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") payable semi-annually on each Payment Date
in an amount equal to (i) $0.05% of the aggregate initial principal amount of
all Outstanding Series of Notes for so long as CPL or an Affiliate of CPL is the
Servicer or Transition Charges are included in amounts on Bills otherwise sent
by the Servicer to REPs or Customers, as applicable, for amounts owed to the
Servicer on its own account or (ii) $0.60% of the aggregate initial principal
amount of all Outstanding Series of Notes if Transition Charges are not included
in amounts on Bills otherwise sent by the Servicer to Customers for amounts owed
to the Servicer on its own account but, instead, are billed separately to
Customers. So long as CPL or an affiliate thereof remains as Servicer, the
Servicer shall not cause Transition Charges to be billed separately to Customers
or REPs from amounts owed to the Servicer on its own account. The Servicer also
shall be entitled to retain as additional compensation (i) any interest earnings
on TC Payments received by the Servicer and invested by the Servicer during each
Collection Period prior to remittance to the Collection Account and (ii) all
late payment charges, if any, collected from Customers or REPs.
(b) The Servicing Fee set forth in Section 6.06(a) shall be
paid to the Servicer by the Indenture Trustee, 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
any such date should be added to the Servicing Fee payable on the subsequent
Payment Date.
(c) Except as expressly provided elsewhere in this Agreement,
the Servicer shall be required to pay from its own account expenses incurred by
the Servicer 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 (other than taxes based on the Servicer's net income)
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 any extra payment or reimbursement therefor.
SECTION 6.07. Compliance with Applicable Law. The Servicer
covenants and agrees, in servicing the Transition Property, to comply in all
material respects with all laws applicable to, and binding upon, the Servicer
and relating to such Transition Property the noncompliance with which would have
a material adverse effect on the value of the 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 Transition Property. The Servicer shall provide to the Holders and the
Indenture Trustee access to the Transition Property Records in such cases where
the Holders and the Indenture Trustee 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 respective
offices of the Servicer. Nothing in this Section shall affect the obligation of
the Servicer to observe any applicable law (including any PUCT 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 an Affiliate of CPL,
the Rating Agency Condition shall have been satisfied in connection therewith;
provided further that the Servicer shall remain obligated and be liable under
this Agreement for the servicing and administering of the Transition Property in
accordance with the provisions hereof without diminution of such obligation and
liability by virtue of the appointment of such Person and to the same extent and
under the same terms and conditions as if the Servicer alone were servicing and
administering the Transition Property; and provided further, however, that
nothing herein (including the Rating Agency Condition) shall preclude the
execution by the Servicer of an REP Service Agreement with any REP pursuant to
applicable PUCT Regulations. The fees and expenses of any such Person shall be
as agreed between the Servicer and such Person from time to time and none of the
Note Issuer, the Indenture Trustee, the Holders or any other Person shall have
any responsibility therefor or right or claim thereto. Any such appointment
shall not 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, commencing [35] days after the Closing Date, the
Servicer shall remit to the General Subaccount of the Collection Account the
total TC 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 Transition Charges (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, during any period in which the
Servicer maintains a long-term rating of at least A or its equivalent or the
Rating Agency Condition is otherwise satisfied, the Servicer shall no longer be
required to make Daily Remittances and, in lieu thereof, the Servicer shall, on
each Monthly Remittance Date, remit the Aggregate Remittance Amount for the
applicable Collection Period to the General Subaccount of the Collection
Account. All such remittances shall be made by wire transfer of immediately
available funds.
(c) The Servicer agrees and acknowledges that it holds all TC
Payments collected by it for the benefit of the Note Issuer and the Holders and
that all such amounts will be remitted by the Servicer in 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 further agrees not to make any claim to
reduce its obligation to remit all TC 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) On or before each [ _________] commencing [ _______] 2001,
the Servicer shall calculate the amount of any Remittance Shortfall or Excess
Remittance for the prior Reconciliation Period and (A) if a Remittance Shortfall
exists, the Servicer shall make a supplemental remittance to the General
Subaccount of the Collection Account within two Servicer Business Days, or, if
monthly remittances are permitted under Section 6.11(b), then on the next
Monthly Remittance Date in the amount of such Remittance Shortfall, or (B) if an
Excess Remittance exists, the Servicer shall be entitled either (i) to reduce
the amount of each Daily Remittance (or, if monthly remittances are permitted
under Section 6.11(b), each Aggregate Remittance Amount) which the Servicer
subsequently remits to the General Subaccount of the Collection Account 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
the relevant date set forth above 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. Maintenance of Operations. Subject to Section
6.03, CPL agrees to continue to operate its electric transmission and
distribution system to provide service (or, if transmission and distribution are
split, to provide wire service directly to its customers) so long as it is
acting as the Servicer under this Agreement.
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 remit to the Collection
Account on behalf of the Note Issuer any required remittance that shall
continue unremedied for a period of five Business Days after written
notice of such failure is received by the Servicer from the Note Issuer
or the Indenture Trustee or after discovery of such failure by an
officer of the Servicer; or
(b) any failure on the part of the Servicer or, so long as the
Servicer is CPL or an affiliate thereof, any failure on the part of
CPL, as the case may be, duly to observe or to perform in any material
respect any other covenants or agreements of the Servicer or CPL, as
the case may be, set forth in this Agreement or any other Basic
Document to which it is a party, which failure shall (i) materially and
adversely affect the rights of the Holders and (ii) continue unremedied
for a period of [60] 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 CPL, as the case may be, by the Note Issuer or
(B) to the Servicer or CPL, as the case may be, by the Indenture
Trustee or by the Holders of Notes evidencing not less than [25]
percent 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 in any material
respect when made, which has a material adverse effect on the Holders
and which material adverse effect continues unremedied for a period of
[60] days after the date on which written notice thereof, requiring the
same to be remedied, shall have been delivered to the Servicer by the
Note Issuer or the Indenture Trustee; or
(d) an Insolvency Event occurs with respect to the
Servicer or CPL;
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 a majority of the Outstanding Amount of the Notes of all Series,
by notice then given in writing to the Servicer (and to the Indenture Trustee if
given by the Holders) (a "Termination Notice") may terminate all the rights and
obligations (other than the obligations set forth in Section 6.02) of the
Servicer under this Agreement. In addition, upon a Servicer Default described in
Section 7.01(a), the Holders and the Indenture Trustee as financing parties
under the Securitization Law (or any of their representatives) shall be entitled
to apply to the district court of ▇▇▇▇▇▇ County for sequestration and payment of
revenues arising with respect to the 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 Transition
Property, the Transition Charges 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 hereby
authorized and empowered to execute and deliver, on behalf of the predecessor
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such Termination Notice, whether to
complete the transfer of the Transition Property Records and related documents,
or otherwise. The predecessor Servicer shall cooperate with the successor
Servicer, 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 all Transition Property Records and all cash amounts that shall at the
time be held by the predecessor Servicer for remittance, or shall thereafter be
received by it with respect to the Transition Property or the Transition
Charges. In case a successor Servicer is appointed as a result of a Servicer
Default, all reasonable costs and expenses (including reasonable attorney's fees
and expenses) incurred in connection with transferring the 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 accordance with the terms of this
Agreement, the predecessor Servicer shall continue to perform its functions as
Servicer under this Agreement, and shall be entitled to receive the requisite
portion of the 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 Indenture Trustee'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 reasonably
acceptable to the Note Issuer and provide prompt written 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 PUCT or a
court of competent jurisdiction to appoint a successor Servicer under this
Agreement. A Person shall qualify as a successor Servicer only if (i) such
Person is permitted under PUCT 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 Note Issuer 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
accordance with this Agreement. Upon any such waiver of a past default, such
default shall cease to exist, and any Servicer Default arising therefrom shall
be deemed to have been remedied for every purpose of this Agreement. No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereto.
SECTION 7.04. Notice of Servicer Default. The Servicer shall
deliver to 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 Note Issuer with five Business Days' prior
written notice given to the Rating Agencies and the prior written consent of the
Indenture Trustee (which consent shall not be unreasonably withheld), but
without the consent of any of the 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 Note Issuer 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 Note Issuer with five Business Days' prior written
notice given to the Rating Agencies and the prior written consent of the
Indenture Trustee (which consent shall not be unreasonably withheld) and the
prior written consent of the Holders evidencing not less than a majority of the
Outstanding Amount of the Notes affected thereby, 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, TC Payments 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 provided, further, that any
amendment of the provisions of Sections 4.01 or 4.03 of this Agreement shall
satisfy the Rating Agency Condition (except that with respect to Moody's it
shall be sufficient to provide ten days prior notice in lieu of satisfying such
condition).
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 Note Issuer 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 TC Payments received as a result of changes to
the Servicer's current computerized customer information system, including
changes which would replace the remittances contemplated by the estimation
procedures set forth in Annex I with remittances of TC Collections determined to
have been actually received; provided that any such amendment shall not have a
material adverse effect on the Holders of then Outstanding Notes.
SECTION 8.02. Maintenance of Accounts and Records. (a) The
Servicer shall maintain accounts and records as to the Transition Property
accurately and in accordance with its standard accounting procedures and in
sufficient detail to permit reconciliation between TC Payments received by the
Servicer and TC Collections from time to time deposited in the Collection
Account.
(b) The Servicer shall permit the Indenture Trustee and its
agents at any time during normal business hours, upon reasonable notice to the
Servicer and to the extent it does not unreasonably interfere with the
Servicer's normal operations, to inspect, audit and make copies of and abstracts
from the Servicer's records regarding the Transition Property and the Transition
Charges. Nothing in this Section 8.02(b) shall affect the obligation of the
Servicer to observe any applicable law (including any PUCT 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 8.02(b).
SECTION 8.03. Notices. Unless otherwise specifically provided
herein, all demands, notices and communications upon or to the Servicer, the
Note Issuer, the Indenture Trustee or the Rating Agencies under this Agreement
shall be sufficiently given for all purposes hereunder if in writing and
delivered personally, sent by documented delivery service or, to the extent
receipt is confirmed telephonically, sent by telecopy or other form of
electronic transmission, (a) in the case of the Servicer, to Central Power and
Light Company ▇/▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ Corporation, at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention of Treasurer, telephone:(▇▇▇) ▇▇▇-▇▇▇▇,
facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ (b) in the case of the Note Issuer to CPL Transition
Funding LLC, at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention of
___________, telephone: ____________, facsimile:_____________, (c) in the case
of the Indenture Trustee, to it at the Corporate Trust Office, telephone:
____________, facsimile:_____________, (d) in the case of Moody's, to ▇▇▇▇▇'▇
Investors Service, Inc., ABS Monitoring Department, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, telephone: (▇▇▇) ▇▇▇-▇▇▇▇, facsimile: (▇▇▇) ▇▇▇-▇▇▇▇, (e) in the
case of S&P, to Standard & Poor's, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, Attention of Asset Backed Surveillance Department, telephone: (212)
▇▇▇-▇▇▇▇, facsimile: (▇▇▇) ▇▇▇-▇▇▇▇, (f) in the case of Fitch, to Fitch IBCA,
Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention of ABS Surveillance,
telephone: (▇▇▇) ▇▇▇-▇▇▇▇, facsimile: (▇▇▇) ▇▇▇-▇▇▇▇, (g) in the case of Duff &
▇▇▇▇▇▇, to ▇▇▇▇ & ▇▇▇▇▇▇ Credit Rating Co., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention of Asset-Backed Monitoring Group, telephone:
____________, facsimile:_____________, or (h) as to each of the foregoing, at
such other address as shall be designated by written notice to the other
parties.
SECTION 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 Note Issuer
and, to the extent provided herein or in the Basic Documents, the Indenture
Trustee and the Holders, and the other Persons expressly referred to herein, and
such Persons shall have the right to enforce the relevant provisions of this
Agreement. Nothing in this Agreement, whether express or implied, shall be
construed to give to any other Person any legal or equitable right, remedy or
claim in the 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 remainder of such provision (if any)
or the remaining provisions hereof (unless such a construction shall be
unreasonable), and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
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 THE LAWS OF THE STATE OF TEXAS, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 8.10. Assignment to Indenture Trustee. The Servicer
hereby acknowledges and consents to any mortgage, pledge, assignment and grant
of a security interest by the Note Issuer to the Indenture Trustee pursuant to
the Indenture for the benefit of the Holders of any or all of the Note Issuer's
rights hereunder.
SECTION 8.11. Nonpetition Covenants. Notwithstanding any prior
termination of this Agreement or the Indenture, the Servicer shall not, prior to
the date which is one year and one day after the termination of the Indenture
with respect to the Note Issuer, acquiesce, petition or otherwise invoke or
cause the Note Issuer to invoke or join with them in provoking the process of
any Governmental Authority for the purpose of commencing or sustaining a case
against the Note Issuer under any federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Note Issuer or any substantial
part of the property of the Note Issuer or ordering dissolution, the winding up
or liquidation of the affairs of the Note Issuer.
SECTION 8.12. Limitation of Liability. It is expressly
understood and agreed by the parties hereto that this Agreement is executed and
delivered by the Indenture Trustee, not individually or personally but solely as
Indenture Trustee on behalf of the Holders, in the exercise of the powers and
authority conferred and vested in it.
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.
CPL TRANSITION FUNDING LLC
By: _________________________________,
as Manager
Name:
CENTRAL POWER AND LIGHT COMPANY
By: _________________________________
Name:
Title:
Acknowledged and Accepted:
---------------------------,
as Indenture Trustee
By: _______________________
Name:
Title:
EXHIBIT A
to Transition Property
Servicing Agreement
MONTHLY SERVICER'S CERTIFICATE
EXHIBIT B
to Transition Property
Servicing Agreement
CERTIFICATE OF COMPLIANCE
The undersigned hereby certifies that he/she is the duly
elected and acting _________________ of [NAME OF SERVICER], as servicer (the
"Servicer") under the Transition Property Servicing Agreement dated as of
[__________], 2000 (the "Servicing Agreement") between the Servicer and CPL
Transition Funding LLC (the "Note Issuer") and further that:
1. A review of the activities of the Servicer and of its
performance under the Servicing Agreement during the twelve months ended [June
30], [ ] has been made under the supervision of the undersigned pursuant to
Section 3.03 of the Servicing Agreement; and
2. To the best of the undersigned's knowledge, based on such
review, the Servicer has fulfilled all of its material obligations in all
material respects under the Servicing Agreement throughout the twelve months
ended [June 30],[ _____], except for those material defaults in the fulfillment
of material obligations listed on Annex A hereto.
Executed as of this ______________ day of _________________,
____.
[NAME OF SERVICER]
By: ____________________________
Name:
Title:
ANNEX A
to Certificate of Compliance
LIST OF SERVICER DEFAULTS
The following material defaults known to the undersigned occurred during the
year ended [June 30], [________]:
Nature of Default Status
EXHIBIT C
to Transition Property
Servicing Agreement
FORM OF ANNUAL TRUE-UP MECHANISM
ADVICE LETTER
EXHIBIT D
to Transition Property
Servicing Agreement
FORM OF INTERIM TRUE-UP MECHANISM ADVICE LETTER
EXHIBIT E
to Transition Property
Servicing Agreement
SERVICER'S CERTIFICATE
SCHEDULE 4.01(a)
to Transition Property
Servicing Agreement
EXPECTED AMORTIZATION SCHEDULE
ANNEX I
to Transition Property
Servicing Agreement
ANNEX II
to Transition Property
Servicing Agreement