EXECUTION COPY
SERVICING AGREEMENT
BONDABLE TRANSITION PROPERTY SERVICING AGREEMENT
between
JCP&L TRANSITION FUNDING LLC
Issuer
and
JERSEY CENTRAL POWER & LIGHT COMPANY
Servicer
Dated as of June 11, 2002
TABLE OF CONTENTS
ARTICLE I DEFINITIONS 1
Section 1.01 Definitions..............................................1
Section 1.02 Other Definitional Provisions............................1
ARTICLE II APPOINTMENT AND AUTHORIZATION OF SERVICER...........................2
Section 2.01 Appointment of Servicer; Acceptance of Appointment.......2
Section 2.02 Authorization............................................2
Section 2.03 Dominion and Control Over Transferred Bondable
Transition Property......................................2
ARTICLE III BILLING SERVICES...................................................2
Section 3.01 Duties of Servicer.......................................2
Section 3.02 Collection and Allocation of the Transition
Bond Charge..............................................4
Section 3.03 Payment of TBC Collections...............................4
Section 3.04 Servicing And Maintenance Standards......................6
Section 3.05 Servicer's Certificates..................................6
Section 3.06 Annual Statement as to Compliance........................6
Section 3.07 Annual Independent Certified Public Accountants'
Report...................................................7
Section 3.08 Bondable Transition Property Documentation...............7
Section 3.09 Computer Records; Audits of Documentation................7
Section 3.10 Defending Transferred Bondable Transition Property
Against Claims...........................................8
ARTICLE IV SERVICES RELATED TO TRANSITION BOND CHARGE ADJUSTMENTS..............9
Section 4.01 Transition Bond Charge Adjustments.......................9
ARTICLE V THE SERVICER.........................................................9
Section 5.01 Representations and Warranties of Servicer...............9
Section 5.02 Indemnities of Servicer; Release of Claims..............11
Section 5.03 Merger or Consolidation of, or Assumption of
the Obligations of, Servicer............................12
Section 5.04 Assignment Of Servicer's Obligations....................14
Section 5.05 Limitation on Liability of Servicer and Others..........14
Section 5.06 JCP&L Not to Resign as Servicer.........................14
Section 5.07 Quarterly Servicing Fee.................................15
Section 5.08 Servicer Expenses.......................................15
Section 5.09 Subservicing............................................15
Section 5.10 No Servicer Advances....................................15
Section 5.11 Remittances.............................................15
Section 5.12 Protection of Title.....................................16
ARTICLE VI SERVICER DEFAULT...................................................17
Section 6.01 Servicer Default........................................17
Section 6.02 Notice of Servicer Default..............................18
Section 6.03 Waiver of Past Defaults.................................18
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Section 6.04 Appointment of Successor................................18
Section 6.05 Cooperation With Successor..............................19
ARTICLE VII MISCELLANEOUS PROVISIONS..........................................19
Section 7.01 Amendment...............................................19
Section 7.02 Notices.................................................21
Section 7.03 Limitations on Rights of Others.........................21
Section 7.04 Severability............................................21
Section 7.05 Separate Counterparts...................................22
Section 7.06 Headings................................................22
Section 7.07 Governing Law...........................................22
Section 7.08 Assignment to the Trustee...............................22
Section 7.09 Nonpetition Covenants...................................22
Section 7.10 Termination.............................................22
ANNEX 1 TBC Adjustment Process and Reports--JCP&L Transition
Funding LLC
EXHIBIT A Servicing Procedures
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BONDABLE TRANSITION PROPERTY SERVICING AGREEMENT, dated as of June 11,
2002, by and between JCP&L TRANSITION FUNDING LLC, a Delaware limited liability
company, as Issuer (the "Issuer"), and JERSEY CENTRAL POWER & LIGHT COMPANY, a
New Jersey corporation, in its capacity as Servicer (the "Servicer") of the
Bondable Transition Property hereunder.
W I T N E S S E T H:
WHEREAS the Servicer is willing to service all Transferred Bondable
Transition Property purchased from the Seller by the Issuer; and
WHEREAS the Issuer, in connection with its ownership of the Transferred
Bondable Transition Property, desires to engage the Servicer to carry out the
functions described herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 DEFINITIONS. Capitalized terms used and not otherwise defined
herein shall have the meanings assigned to them in Appendix A of the Indenture
dated as of June 11, 2002 between the Issuer and The Bank of New York, as
Trustee (the "Trustee").
SECTION 1.02 OTHER DEFINITIONAL PROVISIONS.
(a) Non-capitalized terms used herein that are defined in the
Competition Act, as the context requires, have the meanings assigned to such
terms in the Competition Act, but without giving effect to amendments to the
Competition Act after the date hereof which have a material adverse effect on
the Issuer or the Transition Bondholders.
(b) All terms defined in this Servicing Agreement 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 Servicing Agreement shall refer to this Servicing
Agreement as a whole and not to any particular provision of this Servicing
Agreement; Article, Section, Annex, Schedule and Exhibit references contained in
this Servicing Agreement are references to Articles, Sections, Annexes,
Schedules and Exhibits in or to this Servicing Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation".
(d) The definitions contained in this Servicing Agreement are
applicable to the singular as well as the plural forms of such terms.
ARTICLE II
APPOINTMENT AND AUTHORIZATION OF SERVICER
SECTION 2.01 APPOINTMENT OF SERVICER; ACCEPTANCE OF APPOINTMENT. Subject
to Section 5.06 and Article VI, the Issuer hereby appoints the Servicer, and the
Servicer hereby accepts such appointment, to perform the Servicer's obligations
pursuant to this Servicing Agreement on behalf of and for the benefit of the
Issuer in accordance with the terms of this Servicing Agreement. This
appointment and the Servicer's acceptance thereof may not be revoked except in
accordance with the express terms of this Servicing Agreement.
SECTION 2.02 AUTHORIZATION. With respect to all or any portion of the
Transferred Bondable Transition Property, the Servicer shall be, and hereby is,
authorized and empowered by the Issuer to:
(a) on behalf of itself, the Issuer, or both, as the case may be,
execute and deliver any and all instruments, documents or notices; and
(b) on behalf of itself, the Issuer, or both, as the case may be, make
any filing and participate in proceedings of any kind with any governmental
authorities, including with the BPU.
The Issuer shall furnish the Servicer with such executed documents as
have been prepared by the Servicer for execution by the Issuer, and with such
other documents as may be in the Issuer's possession, that are necessary or
appropriate to enable the Servicer to carry out its servicing and administrative
duties hereunder. Upon the written request of the Servicer, the Issuer shall
furnish the Servicer with any powers of attorney or other documents necessary or
appropriate to enable the Servicer to carry out its duties hereunder.
SECTION 2.03 DOMINION AND CONTROL OVER TRANSFERRED BONDABLE TRANSITION
PROPERTY. Notwithstanding any other provision herein, the Servicer and the
Issuer agree that the Issuer shall have dominion and control over the
Transferred Bondable Transition Property, and the Servicer, in accordance with
the terms hereof, is acting solely as the servicing agent of the Issuer with
respect to the Transferred Bondable Transition Property. The Servicer hereby
agrees that it shall not take any action that is not authorized by this
Servicing Agreement, the Competition Act or the Financing Order, that is not
consistent with its customary procedures and practices, or that shall impair the
rights of the Issuer with respect to the Transferred Bondable Transition
Property, in each case unless such action is required by law or court or
regulatory order.
ARTICLE III
BILLING SERVICES
SECTION 3.01 DUTIES OF SERVICER. The Servicer, as agent for the Issuer (to
the extent provided herein), shall have the following duties:
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(a) Duties of Servicer Generally. The Servicer will manage, service,
administer and make collections in respect of the Transition Bond Charge. The
Servicer's duties will include:
(i) obtaining meter reads, calculating and billing the Transition
Bond Charge in accordance with the Financing Order and collecting the
Transition Bond Charge from Customers and Third Parties, as applicable;
(ii) responding to inquiries by Customers, Third Parties, the BPU, or
any federal, local or other state governmental authority with respect to
the Transition Bond Charge;
(iii) delivering bills or arranging for the delivery of bills to
Customers and Third Parties, accounting for TBC Collections, investigating
and resolving delinquencies, processing and depositing collections, making
periodic remittances and furnishing periodic reports to the Issuer, the
Trustee and the Rating Agencies;
(iv) selling, as the agent for the Issuer, as its interest may
appear, defaulted or written off accounts in accordance with the Servicer's
usual and customary practices for accounts of its own electric service
customers; and
(v) taking action in connection with Transition Bond Charge
Adjustments as set forth herein.
Anything to the contrary notwithstanding, the duties of the Servicer
set forth in this Servicing Agreement shall be qualified in their entirety by
the Competition Act and any other law effective in New Jersey, the Financing
Order and any BPU 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 procedures, duties and responsibilities set
forth in Exhibit A hereto which, among other things, relate to data acquisition,
usage and ▇▇▇▇ calculation, billing, customer service functions, collections,
payment processing and remittance.
(b) Notification of Laws and Regulations. The Servicer shall
immediately notify the Issuer, the Trustee and the Rating Agencies in writing of
any laws or BPU Regulations hereafter promulgated that have a material adverse
effect on the Servicer's ability to perform its duties under this Servicing
Agreement.
(c) Other Information. Upon the reasonable request of the Issuer, the
Trustee or any Rating Agency, the Servicer shall provide to the Issuer, the
Trustee or the Rating Agencies, as the case may be, any public financial
information in respect of the Servicer, or any material information regarding
the Transferred Bondable Transition Property to the extent it is reasonably
available to the Servicer, that may be reasonably necessary and permitted by law
for the Issuer, the Trustee or the Rating Agencies to monitor the performance by
the Servicer hereunder. In addition, so long as any of the Transition Bonds of
any Series are Outstanding, the Servicer shall provide to the Issuer and to the
Trustee, within a reasonable time after written request therefor, any
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information available to the Servicer or reasonably obtainable by the Servicer
that is necessary to calculate the Transition Bond Charge.
SECTION 3.02 COLLECTION AND ALLOCATION OF THE TRANSITION BOND CHARGE.
(a) The Servicer shall use all reasonable efforts, consistent with its
customary servicing procedures, to collect all amounts owed in respect of the
Transition Bond Charge as and when the same shall become due and shall follow
such collection procedures as the Servicer follows with respect to collection
activities that the Servicer conducts for itself or others. The Servicer shall
not change the amount of or reschedule the due date of any scheduled payment of
the Transition Bond Charge, except as contemplated in this Servicing Agreement
or as required by law or court or BPU Regulations; provided, however, that the
Servicer may take any of the foregoing actions to the extent that such action
would be in accordance with customary billing and collection practices of the
Servicer with respect to billing and collection activities that the Servicer
conducts for itself. The Servicer shall enforce the obligations of any Third
Parties providing billing and collection services with respect to the Transition
Bond Charge.
(b) As specified in the Petition and the Financing Order, any amounts
received by the Servicer from a Customer that represent a partial payment toward
an outstanding balance will be applied in the following manner:
(i) to sales taxes with the partial payment (which the Servicer
collects as trustee for the State of New Jersey and not for its own account
or for that of the Issuer);
(ii) pro rata to the Transition Bond Charge and the Servicer's other
charges and taxes, where any of such charges are in arrears, based on their
proportion to the Servicer's total charges in arrears for that period; and
(iii) pro rata to the Transition Bond Charge and the Servicer's other
charges and taxes, where any of such charges are current charges, based on
their proportion to the Servicer's total current charges assessed for that
period.
JCP&L's other charges may include the Market Transition Charge, the MTC-Tax and
all other charges that JCP&L and any Third Party may be authorized to ▇▇▇▇ and
collect from Customers on account of the provision of electric service. If there
is more than one Series of Transition Bonds Outstanding, the Servicer shall
allocate partial payments among such Series, pro rata, based on the amounts owed
with respect to such Series.
SECTION 3.03 PAYMENT OF TBC COLLECTIONS.
(a) With the exception of the Quarterly Servicing Fee, which the
Servicer is entitled to withhold from TBC Collections pursuant to Section 5.07
hereof, the Servicer agrees to remit to the Trustee for deposit in the
Collection Account TBC Collections for each Billing Month based on its estimated
system-wide write-off percentage and the average number of days outstanding of
bills, as in effect from time to time as follows:
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(i) on each Monthly Remittance Date, for so long as the Servicer has
satisfied the conditions of Section 5.11(b), the Servicer shall remit to
the Trustee for each preceding Billing Month an amount equal to the amount
of TBC Collections deemed to have been received during the preceding
calendar month, based on the estimated system-wide write-off percentage and
the average number of days outstanding of bills then in effect; and
(ii) on each Daily Remittance Date, for so long as the Servicer has
not satisfied the conditions of Section 5.11(b), the Servicer shall remit
to the Trustee an amount equal to the amount of TBC Collections deemed to
have been received during the Business Day which is two Business Days
preceding such Daily Remittance Date, including (for the first Daily
Remittance Date following a period when the Servicer had been remitting on
a Monthly Remittance Date) any amounts on deposit with the Servicer (for
the Billing Month and any prior Billing Month) prior to such Daily
Remittance Date during a period when the Servicer had been remitting on a
Monthly Remittance Date based on the estimated system-wide write-off
percentage and the average number of days outstanding of bills then in
effect.
(b) On or before each Reconciliation Date, the Servicer will reconcile
actual TBC Collections with estimated TBC Collections previously made to the
Trustee in respect of (i) for each Annual Reconciliation Date, each of the
twelve Billing Months beginning fifteen months before the month in which such
Reconciliation Date occurs (or from the first Series Issuance Date, if less than
fifteen months have elapsed), and (ii) for each Monthly Reconciliation Date, the
Billing Month that is three months prior to the Billing Month in which such
Reconciliation Date occurs. In the event that there is a payment shortfall with
respect to the applicable Billing Months or Billing Month, as the case may be,
the Servicer shall pay the shortfall to the Trustee for deposit into the
Collection Account within two Business Days of that Reconciliation Date, or, if
the Servicer remits TBC Collections on each Monthly Remittance Date in
accordance with Section 5.11(b), on the next Monthly Remittance Date. In the
event that there is an overpayment for the applicable Billing Months or Billing
Month, as the case may be, the Servicer may either (A) reduce the amount that
the Servicer is required to remit to the Trustee for deposit in the Collection
Account on the following Remittance Date (and, if necessary, succeeding
Remittance Dates) by the amount of the overpayment or (B) direct the Trustee in
writing to pay to the Servicer from the General Subaccount the amount of the
overpayment, which upon payment shall become the property of the Servicer.
(c) In the event that the Servicer makes changes to its current
computerized customer information system which would allow the Servicer to track
actual TBC Collections and/or otherwise monitor payment and collection activity
more efficiently or accurately than is currently being done under this Servicing
Agreement, the Servicer may substitute actual remittance procedures for the
estimated remittance procedures described above and otherwise modify the
remittance procedures described above as may be appropriate in the interests of
efficiency, accuracy, cost and/or system capabilities. However, the Servicer may
not make any such modification or substitution that will materially and
adversely affect the Transition Bondholders. The Servicer must also give notice
to the Rating Agencies of any such computer system changes no later than sixty
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business days after the date on which all customer accounts are billed on the
new system.
(d) The Servicer and Issuer agree and acknowledge that, although the
Servicer will remit estimated payments arising from the TBC Collections to the
Trustee, the Servicer is not obligated to make any payments on the Transition
Bonds. The Servicer agrees and acknowledges that it holds all TBC Collections
collected by it for the benefit of the Issuer and that all amounts will be
remitted by the Servicer in accordance with this Servicing Agreement without any
surcharge, fee, offset, charge or other deduction and without making any claim
to reduce its obligation to remit all TBC Collections collected by it, except
(i) as set forth in clause (b) above, (ii) with respect to the Quarterly
Servicing Fee that it may withhold pursuant to Section 5.07 hereof and (iii)
with respect to late fees permitted by Section 5.07.
SECTION 3.04 SERVICING AND MAINTENANCE STANDARDS. The Servicer shall, on
behalf of the Issuer:
(a) manage, service, administer and make collections in respect of the
Transferred Bondable Transition Property with reasonable care and in material
compliance with applicable law and regulations, including all applicable BPU
Regulations, using the same degree of care and diligence that the Servicer
exercises with respect to billing and collection activities that the Servicer
conducts for itself and others;
(b) follow standards, policies and procedures in performing its duties
as Servicer that are customary in the electric power distribution industry;
(c) use all reasonable efforts, consistent with its customary servicing
procedures, to enforce and maintain the rights of the Issuer and the Trustee in
respect of the Transferred Bondable Transition Property; and
(d) calculate the Transition Bond Charge in compliance with the
Competition Act, the Financing Order and any applicable tariffs;
except where the failure to comply with any of the foregoing would not have a
material adverse effect on the Issuer's or the Trustee's respective interests in
the Transferred Bondable Transition Property. The Servicer shall follow such
customary and usual practices and procedures as it shall deem necessary or
advisable in its servicing of the Transferred Bondable Transition Property,
which, in the Servicer's judgment, may include the taking of legal action
pursuant to Section 3.10 or otherwise. Notwithstanding the foregoing, the
Servicer shall not change its customary and usual practices and procedures in
any manner that would have a material adverse effect on the Issuer's or the
Trustee's respective interests in the Transferred Bondable Transition Property
unless it shall have provided the Rating Agencies with prior written notice.
SECTION 3.05 SERVICER'S CERTIFICATES. The Servicer will provide to the
Issuer and to the Trustee the statements specified in Annex 1 at the times
indicated therein.
SECTION 3.06 ANNUAL STATEMENT AS TO COMPLIANCE. The Servicer shall deliver
to the Issuer and the Trustee, on or before June 1 of each year, beginning
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June 1, 2003 to and including the June 1 succeeding the retirement of all
Transition Bonds, an Officers' Certificate, stating that:
(a) a review of the activities of the Servicer during the preceding
calendar year (or relevant portion thereof in the case of the first such
Officers' Certificate) and of its performance under this Servicing Agreement has
been made under such officers' supervision; and
(b) to the best of such officers' knowledge, based on such review, the
Servicer has fulfilled all of its obligations under this Servicing Agreement
throughout such period or, if there has been a default in the fulfillment of any
such obligation, describing each such default and its status.
SECTION 3.07 ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT.
(a) The Servicer shall cause a firm of independent certified public
accountants (which may also provide other services to the Servicer or the
Seller) to prepare, and the Servicer shall deliver to the Issuer, to the Trustee
and to each Rating Agency, on or before June 1 of each year, beginning June 1,
2003 to and including the June 1 succeeding the retirement of all Transition
Bonds, a report addressed to the Servicer (the "Annual Accountant's Report"),
which may be included as part of the Servicer's customary auditing activities,
to the effect that such firm has performed certain procedures in connection with
the Servicer's compliance with its obligations under this Servicing Agreement
during the preceding calendar year (or, in the case of the first Annual
Accountant's Report, the period of time from the Initial Transfer Date until
December 31, 2002), identifying the results of such procedures and including any
exceptions noted. In the event such accounting firm requires the Trustee or the
Issuer to agree or consent to the procedures performed by such firm, the Issuer
shall direct the Trustee in writing to so agree, it being understood and agreed
that the Trustee will deliver such letter of agreement or consent in conclusive
reliance upon the direction of the Issuer, and the 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.
SECTION 3.08 BONDABLE TRANSITION PROPERTY DOCUMENTATION. To assure uniform
quality in servicing the Transferred Bondable Transition Property and to reduce
administrative costs, the Servicer shall keep on file, in accordance with its
customary procedures, all Bondable Transition Property Documentation, it being
understood that the Servicer is acting solely as the servicing agent and
custodian for the Issuer with respect to the Bondable Transition Property
Documentation.
SECTION 3.09 COMPUTER RECORDS; AUDITS OF DOCUMENTATION.
(a) Safekeeping. The Servicer shall maintain accurate and complete
accounts, records and computer systems pertaining to the Transferred Bondable
Transition Property and the Bondable Transition Property Documentation in
accordance with its standard accounting procedures and in sufficient detail to
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permit reconciliation between payments or recoveries on (or with respect to) the
Transition Bond Charge and the estimated TBC Collections from time to time
remitted to the Trustee pursuant to Section 3.03 and to enable the Issuer to
comply with this Servicing Agreement and the Indenture. The Servicer shall
conduct, or cause to be conducted, periodic audits of the Bondable Transition
Property Documentation held by it under this Servicing Agreement and of the
related accounts, records and computer systems, in such a manner as shall enable
the Issuer and the Trustee, as pledgee of the Issuer, to verify the accuracy of
the Servicer's record keeping. The Servicer shall promptly report to the Issuer
and to the Trustee any failure on the Servicer's part to hold the Bondable
Transition Property Documentation and maintain its accounts, records and
computer systems as herein provided and shall promptly take appropriate action
to remedy any such failure. Nothing herein shall be deemed to require an initial
review or any periodic review by the Issuer or the Trustee of the Bondable
Transition Property Documentation. The Servicer's duties to hold the Bondable
Transition Property Documentation on behalf of the Issuer set forth in this
Section 3.09, to the extent such Bondable Transition Property Documentation has
not been previously transferred to a Successor Servicer, shall terminate three
years after the earlier of the date on which (i) the Servicer is succeeded by a
Successor Servicer pursuant to the provisions of this Servicing Agreement or
(ii) no Transition Bonds of any Series are Outstanding.
(b) Maintenance of and Access to Records. The Servicer shall maintain
the Bondable Transition Property Documentation at ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇ or at such other office as shall be specified to the Issuer and to
the Trustee by written notice not later than thirty days prior to any change in
location. The Servicer shall permit the Issuer and the Trustee or their
respective duly authorized representatives, attorneys, agents or auditors at any
time during normal business hours to inspect, audit and make copies of and
abstracts from the Servicer's records regarding the Transferred Bondable
Transition Property, the Transition Bond Charge and the Bondable Transition
Property Documentation. The failure of the Servicer to provide access to such
information as a result of an obligation or applicable law (including BPU
Regulations) prohibiting disclosure of information regarding customers shall not
constitute a breach of this Section 3.09(b).
SECTION 3.10 DEFENDING TRANSFERRED BONDABLE TRANSITION PROPERTY AGAINST
CLAIMS. The Servicer shall institute and maintain any action or proceeding
necessary to compel performance by the BPU or the State of New Jersey of any of
their obligations or duties under the Competition Act or the Financing Order
with respect to the Transferred Bondable Transition Property, 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 the
Competition Act, the Financing Order or the Restructuring Order (to the extent
it affects the rights of Transition Bondholders or the validity or value of the
Transferred Bondable Transition Property), as the case may be, the Bondable
Transition Property or the rights of the holders of Transferred Bondable
Transition Property if such repeal, modification or supplement would be adverse
to the Transition Bondholders. The costs of any such action reasonably allocated
by the Servicer to the Transferred Bondable Transition Property shall be payable
from TBC Collections as an Operating Expense in accordance with the Indenture.
The Servicer's obligations pursuant to this Section 3.10 shall survive and
continue notwithstanding the fact that the payment of Operating Expenses
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pursuant to the Indenture may be delayed (it being understood that the Servicer
may be required to advance its own funds to satisfy its obligations under this
Section 3.10).
ARTICLE IV
SERVICES RELATED TO TRANSITION BOND CHARGE ADJUSTMENTS
SECTION 4.01 TRANSITION BOND CHARGE ADJUSTMENTS. The Servicer shall
perform the calculations and take the actions relating to adjusting the
Transition Bond Charge, as set forth in Section 5 of Annex 1, at the times
indicated therein.
ARTICLE V
THE SERVICER
SECTION 5.01 REPRESENTATIONS AND WARRANTIES OF SERVICER. The Servicer
makes the following representations and warranties as of each Transfer Date, on
which the Issuer has relied and will rely in acquiring Transferred Bondable
Transition Property and in entering into this Servicing Agreement. These
representations and warranties shall survive the execution and delivery of this
Servicing Agreement, the sale, transfer, assignment and conveyance of the
Transferred Bondable Transition Property to the Issuer pursuant to the Sale
Agreement and the pledge thereof to the Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer is a corporation duly
organized and in good standing under the laws of the State of its incorporation,
with the corporate power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is presently
conducted and to execute, deliver and carry out the terms of this Servicing
Agreement, and has the power, authority and legal right to service the
Transferred Bondable Transition Property.
(b) Due Qualification. The Servicer is duly qualified to do business as
a foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of property
or the conduct of its business (including the servicing of the Transferred
Bondable Transition Property as required by this Servicing Agreement) requires
such qualifications, licenses or approvals (except where the failure to so
qualify would not be reasonably likely to have a material adverse effect on the
Servicer's business, operations, assets, revenues, properties or prospects or on
the transactions contemplated by this Servicing Agreement).
(c) Power and Authority. The Servicer has the corporate power and
authority to execute and deliver this Servicing Agreement and to carry out its
terms; and the execution, delivery and performance of this Servicing Agreement
have been duly authorized by the Servicer by all necessary corporate action.
(d) Binding Obligation. This Servicing Agreement constitutes a legal,
valid and binding obligation of the Servicer enforceable against the Servicer in
accordance with its terms, subject to bankruptcy, receivership, fraudulent
transfer, insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally from time to time in effect and to general
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principles of equity (regardless of whether considered in a proceeding in equity
or at law).
(e) No Violation. The consummation of the transactions contemplated by
this Servicing Agreement and the fulfillment of the terms hereof will not:
conflict with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time or both) a default under,
the articles of incorporation, by-laws or other constituent documents of the
Servicer, or any indenture, material agreement or other material instrument to
which the Servicer is a party or by which it is bound; or result in the creation
or imposition of any Lien upon any of its properties pursuant to the terms of
any such indenture, material agreement or other material instrument; or violate
any law or any order, rule or regulation applicable to the Servicer of any court
or of any federal or State regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or its
properties.
(f) Approvals. Except for filings with the BPU for adjusting the
Transition Bond Charge pursuant to Section 4.01 and Annex 1, the filing of
financing statements under the New Jersey UCC and the Delaware UCC, the filing
of continuation filings under the New Jersey UCC and the Delaware UCC and the
approval of the Commission pursuant to the Public Utility Holding Company Act of
1935, as amended, no approval, authorization, consent, order or other action of,
or filing with, any court, federal or state regulatory body, administrative
agency or other governmental instrumentality is required in connection with the
execution and delivery by the Servicer of this Servicing 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.
(g) Reports and Certificates. Each report and certificate delivered in
connection with any filing made with the BPU by the Servicer on behalf of the
Issuer with respect to the Transition Bond Charge or Transition Bond Charge
Adjustments 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, this 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 or facts known to the Servicer on the date
such report or certificate is delivered.
(h) No Proceedings. There are no proceedings or investigations pending
or, to the Servicer's best knowledge, threatened before any court, federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or its properties:
(i) seeking to prevent the issuance of the Transition Bonds or the
consummation of any of the transactions contemplated by this Servicing
Agreement or any of the other Basic Documents;
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(ii) except as disclosed by the Servicer to the Issuer (or as
disclosed in filings with the Commission made by the Servicer), seeking any
determination or ruling that might materially and adversely affect the
performance by the Servicer of its obligations under, or the validity or
enforceability against the Servicer of, this Servicing Agreement or any of
the other Basic Documents; or
(iii) relating to the Servicer and which might materially and
adversely affect the federal or State income tax attributes of the
Transition Bonds.
SECTION 5.02 INDEMNITIES OF SERVICER; RELEASE OF CLAIMS.
(a) The Servicer shall be liable as such in accordance herewith only to
the extent of the obligations specifically undertaken by the Servicer under this
Servicing Agreement.
(b) The Servicer shall indemnify the Issuer and the Trustee (for itself
and on behalf of the Transition Bondholders) and each of their respective
trustees, members, managers, officers, directors, employees and agents for, and
defend and hold harmless each such person from and against, any and all Losses
that may be imposed upon, incurred by or asserted against any such person as a
result of:
(i) the Servicer's willful misconduct, bad faith or gross negligence
in the performance of its duties or observance of its covenants under this
Servicing Agreement or the Servicer's reckless disregard of its obligations
and duties under this Servicing Agreement;
(ii) the Servicer's breach of any of its representations or
warranties in this Servicing Agreement; and
(iii) litigation and related expenses relating to its status and
obligations as Servicer (other than any proceedings the Servicer is
required to institute under this Servicing Agreement);
provided, however, that the Servicer shall not be liable for any Losses
resulting from the willful misconduct or gross negligence of any person
indemnified pursuant to this Section 5.02 (each, an "Indemnified Person") or
resulting from a breach of a representation or warranty made by such Indemnified
Person in any of the Basic Documents that gives rise to the Servicer's breach.
Promptly after receipt by an Indemnified Person of notice of its
involvement in any action, proceeding or investigation, such Indemnified Person
shall, if a claim for indemnification in respect thereof is to be made against
the Servicer under this Section 5.02, notify the Servicer in writing of such
involvement. Failure by an Indemnified Person to so notify the Servicer shall
relieve the Servicer from the obligation to indemnify and hold harmless such
Indemnified Person under this Section 5.02 only to the extent that the Servicer
suffers actual prejudice as a result of such failure. With respect to any
action, proceeding or investigation brought by a third party for which
indemnification may be sought under this Section 5.02, the Servicer shall be
entitled to assume the defense of any such action, proceeding or investigation
unless (x) such action, proceeding or investigation exposes the Indemnified
Person to a risk of criminal liability or forfeiture, (y) the Servicer and such
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Indemnified Person have a conflict of interest in their respective defenses of
such action, proceeding or investigation or (z) there exists at the time the
Servicer would assume such defense an ongoing Servicer Default. Upon assumption
by the Servicer of the defense of any such action, proceeding or investigation,
the Indemnified Person shall have the right to participate in such action or
proceeding and to retain its own counsel (including local counsel), and the
Servicer shall bear the reasonable fees, costs and expenses of such separate
counsel. The Indemnified Person shall not settle or compromise or consent to the
entry of any judgment with respect to any pending or threatened claim, action,
suit or proceeding in respect of which indemnification may be sought under this
Section 5.02 (whether or not the Servicer is an actual or potential party to
such claim or action) unless the Servicer agrees in writing to such settlement,
compromise or consent and such settlement, compromise or consent includes an
unconditional release of the Servicer from all liability arising out of such
claim, action, suit or proceeding.
(c) The Servicer's indemnification obligations under Section 5.02(b)
for events occurring prior to the removal or resignation of the Trustee or the
termination of this Servicing Agreement shall survive the resignation or removal
of the Trustee or the termination of this Servicing Agreement and shall include
reasonable costs, fees and expenses of investigation and litigation (including
the Issuer's and the Trustee's reasonable attorneys' fees and expenses).
(d) Except to the extent expressly provided for in the Basic Documents
(including the Servicer's claims with respect to the Quarterly Servicing Fees
and the Seller's claim for payment of the purchase price of the Transferred
Bondable Transition Property), the Servicer hereby releases and discharges the
Issuer (including its Member, Managers, officers, employees and agents, if any)
and the Trustee (including its respective officers, directors, employees and
agents) (collectively, the "Released Parties") from any and all actions, claims
and demands whatsoever, which the Servicer shall or may have against any such
person relating to the Transferred Bondable 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 5.03 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS
OF, SERVICER. Any Person or Persons:
(a) into which the Servicer may be merged or consolidated and which
succeeds to all or a significant part of the electric distribution business of
the Servicer,
(b) which results from the division of the Servicer into two or more
Persons and which succeeds to all or a significant part of the electric
distribution business of the Servicer,
(c) which may result from any merger or consolidation to which the
Servicer shall be a party and which succeeds to all or a significant part of the
electric distribution business of the Servicer,
(d) which may, in a transaction or a series of related transactions,
succeed to the properties and assets of the Servicer substantially as a whole
and which, in a transaction or a series of related transactions, succeeds to all
or a significant part of the electric distribution business of the Servicer, or
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(e) which may otherwise succeed to all or a significant part of the
electric distribution business of the Servicer,
which Person or Persons in any of the foregoing cases executes or execute an
agreement of assumption to perform every obligation of the Servicer under this
Servicing Agreement, shall be the successor or successors to the Servicer
hereunder without the execution or filing of any document or any further act by
any of the parties to this Servicing Agreement; provided, however, that:
(i) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Section 5.01 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 Servicer shall have delivered to the Issuer, the Trustee and
the Rating Agencies an Officers' Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession and such agreement of
assumption comply with this Section 5.03 and that all conditions precedent,
if any, provided for in this Servicing Agreement relating to such
transaction have been complied with;
(iii) the Servicer shall have delivered to the Issuer, the Trustee
and the Rating Agencies an Opinion of Counsel either:
(A) stating that, in the opinion of such counsel, all filings to
be made by the Servicer, including New Jersey UCC filings
and Delaware UCC filings, that are necessary fully to
preserve and protect the interests of the Trustee in the
Transferred Bondable Transition Property have been executed
and filed and reciting the details of such filings, or
(B) stating that, in the opinion of such counsel, no such action
is necessary to preserve and protect such interests;
(iv) the Rating Agencies shall have received prior written notice of
such transaction, and the then current ratings on any of the Outstanding
Transition Bonds will not be withdrawn or downgraded by the Rating
Agencies; and
(v) the Servicer shall have delivered to the Issuer, the Trustee and
the Rating Agencies an opinion of independent tax counsel (as selected by,
and in form and substance reasonably satisfactory to, the Servicer, and
which may be based on a ruling from the Internal Revenue Service) to the
effect that, for federal income tax purposes, such consolidation or merger
will not result in a material adverse federal income tax consequence to the
Servicer, the Issuer, the Trustee or the then existing Transition
Bondholders.
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The Servicer shall not consummate any transaction referred to in clauses (a),
(b), (c), (d) or (e) above except upon execution of the above described
agreement of assumption and compliance with subclauses (i), (ii), (iii), (iv)
and (v) above. When any Person or Persons acquires or acquire the properties and
assets of the Servicer substantially as a whole and becomes or become the
successor or successors to the Servicer in accordance with the terms of this
Section 5.03, then upon the satisfaction of all of the other conditions of this
Section 5.03, the Servicer shall automatically and without further notice be
released from its obligations hereunder.
SECTION 5.04 ASSIGNMENT OF SERVICER'S OBLIGATIONS. The Servicer may assign
any or all of its obligations hereunder to any successor if either (i) prior
written notice has been provided to the Rating Agencies and the then current
ratings on any of the Outstanding Transition Bonds will not be withdrawn or
downgraded by the Rating Agencies and any other conditions specified in the
Financing Order have been satisfied or (ii) the Servicer is replaced by a
successor pursuant to Section 5.03 hereof.
SECTION 5.05 LIMITATION ON LIABILITY OF SERVICER AND OTHERS. The Servicer
shall not be liable to the Issuer or the Trustee, except as provided under this
Servicing Agreement, for any action taken or for refraining from the taking of
any action pursuant to this Servicing Agreement or for good faith errors in
judgment; provided, however, that this provision shall not protect the Servicer
against any liability that would otherwise be imposed by reason of willful
misconduct, bad faith or gross negligence in the performance of its duties or by
reason of reckless disregard of its obligations and duties under this Servicing
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 Trustee or on any document of any kind, prima facie properly executed and
submitted by any Person, respecting any matters arising under this Servicing
Agreement.
Except as provided in this Servicing Agreement, the Servicer shall not
be under any obligation to appear in, prosecute or defend any legal action that
is not incidental to its duties to service the Transferred Bondable Transition
Property in accordance with this Servicing Agreement or related to its
obligation to pay indemnification, and that in its reasonable opinion may cause
it to incur any expense or liability.
SECTION 5.06 JCP&L NOT TO RESIGN AS SERVICER. Subject to the provisions of
Sections 5.03 and 5.04, JCP&L shall not resign from the obligations and duties
imposed on it as Servicer under this Servicing Agreement except upon a
determination that the performance of its duties under this Servicing Agreement
shall no longer be permissible under applicable law. Any such resignation shall
not be effective until approved by the BPU. Notice of any such determination
permitting the resignation of JCP&L shall be communicated to the Issuer, the
Trustee and each Rating Agency at the earliest practicable time (and, if such
communication is not in writing, shall be confirmed in writing at the earliest
practicable time), and any such determination shall be evidenced by an Opinion
of Counsel to such effect delivered to the Issuer and the Trustee concurrently
with or promptly after such notice. No such resignation shall be permitted if
such resignation will result in the reduction or withdrawal of the then current
ratings on any Outstanding Transition Bond. No such resignation shall become
effective until a Successor Servicer has assumed the servicing obligations and
duties hereunder of the Servicer in accordance with Section 6.04.
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SECTION 5.07 QUARTERLY SERVICING FEE. The Issuer agrees to pay the
Servicer the Quarterly Servicing Fee with respect to all Series of Transition
Bonds. On each Monthly Remittance Date that coincides with a Payment Date, the
Servicer shall be entitled to withhold the amount of the Quarterly Servicing Fee
from TBC Collections as compensation under this Servicing Agreement unless the
Trustee has notified the Servicer in writing that the Issuer does not hold
sufficient funds to pay amounts owed in such month to the Trustee. For so long
as JCP&L is the Servicer, the Quarterly Servicing Fee shall be $100,000. The
Servicer shall be entitled to retain as additional compensation net investment
income on TBC Collections related to the Transferred Bondable Transition
Property received by the Servicer during any Collection Period prior to
remittance to the Collection Account and the late fees, if any, paid by
Customers to the Servicer. The Issuer and the Servicer agree and acknowledge
that the foregoing fees constitute a fair and reasonable price for the
obligations to be performed by the Servicer. In no event shall the Trustee be
liable for any Quarterly Servicing Fee.
SECTION 5.08 SERVICER EXPENSES. Except as otherwise expressly provided
herein, the Servicer shall be required to pay all expenses incurred by it in
connection with its activities hereunder, including fees and disbursements of
independent accountants and counsel, taxes imposed on the Servicer and expenses
incurred in connection with reports to the Transition Bondholders and shall not
be entitled to any additional payment or reimbursement therefor.
SECTION 5.09 SUBSERVICING. The Servicer may at any time appoint a
subservicer to perform all or any portion of its obligations as Servicer
hereunder; provided, however, that written notice has been given to the Rating
Agencies and the Trustee and the then current ratings on any Outstanding
Transition Bonds will not be withdrawn or downgraded by the Rating Agencies; and
provided, further, that the Servicer shall remain obligated and be liable to the
Issuer, the Trustee and the Transition Bondholders for the servicing and
administering of the Transferred Bondable Transition Property in accordance with
the provisions hereof without diminution of such obligation and liability by
virtue of the appointment of such subservicer and to the same extent and under
the same terms and conditions as if the Servicer alone were servicing and
administering the Transferred Bondable Transition Property. The fees and
expenses of the subservicer shall be as agreed between the Servicer and its
subservicer from time to time, and none of the Issuer, the Trustee or the
Transition Bondholders shall have any responsibility therefor. Any such
appointment shall not constitute a Servicer resignation under Section 5.06.
SECTION 5.10 NO SERVICER ADVANCES. The Servicer shall not make any
advances of interest on or principal of the Transition Bonds.
SECTION 5.11 REMITTANCES.
(a) The Servicer shall remit TBC Collections (from whatever source) in
accordance with Section 3.03(a)(ii), and all proceeds of other Collateral of the
Issuer, if any, received by the Servicer, to the Trustee for deposit pursuant to
the Indenture, not later than each Daily Remittance Date. The Servicer shall
promptly remit any Indemnity Amounts paid or received by it immediately to the
Trustee for deposit pursuant to the Indenture.
(b) Notwithstanding the foregoing clause (a), as long as
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(i) JCP&L or any successor to JCP&L's electric distribution business
remains the Servicer,
(ii) no Servicer Default has occurred and is continuing,
(iii)(A) JCP&L or any Successor Servicer to JCP&L's electric
distribution business, maintains a short-term rating of
`A-1' or better by S&P, `P-1' or better by ▇▇▇▇▇'▇, and
`F-1' or better by Fitch,
or
(B) any additional conditions or limitations imposed by the
Rating Agencies are complied with and each Rating Agency has
notified the Servicer, the Issuer and the Trustee that the
monthly remittance will not result in a reduction or
withdrawal of the then current rating of any Outstanding
Transition Bonds,
(iv) the BPU has approved Servicer remittances on a monthly basis and
(v) the Servicer has delivered to the Rating Agencies an Opinion of
Counsel addressing certain "true sale" or "non-consolidation" issues in
form and substance reasonably satisfactory to such Rating Agencies,
the Servicer need not make the daily remittances required by clause (a), but in
lieu thereof, shall remit all TBC Collections (from whatever source) in
accordance with Section 3.03(a)(i), and all proceeds of other Collateral of the
Issuer, if any, received by the Servicer during any Collection Period to the
Trustee for deposit pursuant to the Indenture, not later than the corresponding
Monthly Remittance Date.
SECTION 5.12 PROTECTION OF TITLE. The Servicer shall execute and file such
filings and cause to be executed 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 Trustee in the Transferred Bondable Transition Property,
including all filings required under the New Jersey UCC and the Delaware UCC
relating to the transfer of ownership of or a security interest in the
Transferred Bondable Transition Property by the Seller to the Issuer or the
security interest granted by the Issuer to the Trustee in the Transferred
Bondable Transition Property. The Servicer shall deliver (or cause to be
delivered) to the Issuer and the Trustee file-stamped copies of, or filing
receipts for, any document filed as provided above, as soon as available
following such filing.
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ARTICLE VI
SERVICER DEFAULT
SECTION 6.01 SERVICER DEFAULT. If any one of the following events (a
"Servicer Default") occurs and is continuing:
(a) any failure by the Servicer to remit to the Trustee, on behalf of
the Issuer, any required remittance that continues unremedied for a period of
five Business Days after the date it is required to be paid; or
(b) any failure by the Servicer duly to observe or perform in any
material respect any other covenant or agreement of the Servicer set forth in
this Servicing Agreement or any other Basic Document to which the Servicer is a
party, which failure:
(i) materially and adversely affects the Transferred Bondable
Transition Property or the rights of the Transition Bondholders; and
(ii) continues unremedied for a period of sixty days after written
notice of such failure has been given to the Servicer by the Issuer, the
Trustee or the Holders of not less than twenty-five percent of the
Outstanding principal balance of the Transition Bonds of all Series and
Classes, acting together as a single class, or after discovery of such
failure by an officer of the Servicer, as the case may be; or
(c) any representation or warranty made by the Servicer in this
Servicing Agreement proves to have been incorrect when made, which has a
material adverse effect on the Issuer or the Transition Bondholders and which
material adverse effect continues unremedied for a period of sixty days after
the date on which written notice thereof has been given to the Servicer by the
Issuer, the Trustee or the Holders of not less than twenty-five percent of the
Outstanding principal balance of the Transition Bonds of all Series and Classes,
acting together as a single class, or after discovery of such failure by an
officer of the Servicer, as the case may be; or
(d) an Insolvency Event occurs with respect to the Servicer;
then, and in each and every case, so long as the Servicer Default shall not have
been remedied, the Trustee, with the consent of the Holders of a majority of the
Outstanding principal balance of the Transition Bonds of all Series and Classes,
voting together as a single class, by notice then given in writing to the
Servicer (a "Termination Notice"), may terminate all the rights and obligations
(other than the indemnification obligations set forth in Section 5.02 hereof and
the obligation under Section 6.04 to continue performing its functions as
Servicer until a Successor Servicer is appointed) of the Servicer under this
Servicing Agreement. In addition, upon a Servicer Default because of a failure
to make required remittances, the Issuer and the Trustee shall each be entitled
to apply to the BPU or any court of competent jurisdiction for sequestration and
payment to the Trustee of revenues arising with respect to the Transferred
Bondable Transition Property.
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On or after the receipt by the Servicer of a Termination Notice, all
authority and power of the Servicer under this Servicing Agreement, whether with
respect to the Transferred Bondable Transition Property, the related Transition
Bond Charge or otherwise, shall, upon appointment of a Successor Servicer
pursuant to Section 6.04, without further action, pass to and be vested in such
Successor Servicer and, without limitation, the Trustee is hereby authorized and
empowered to execute and deliver, on behalf of the predecessor Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments, and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such Termination Notice, whether to complete the transfer of the
Bondable Transition Property Documentation and related documents, or otherwise.
The predecessor Servicer shall cooperate with the Successor Servicer, the
Trustee and the Issuer in effecting the termination of the responsibilities and
rights of the predecessor Servicer under this Servicing Agreement, including the
transfer to the Successor Servicer for administration by it of all cash amounts
that shall at the time be held by the predecessor Servicer for remittance, or
shall thereafter be received by it with respect to the Transferred Bondable
Transition Property or the related Transition Bond Charge. As soon as
practicable after receipt by the Servicer of such Termination Notice, the
Servicer shall deliver the Bondable Transition Property Documentation to the
Successor Servicer. All reasonable costs and expenses (including attorneys' fees
and expenses) incurred in connection with transferring the Bondable Transition
Property Documentation to the Successor Servicer and amending this Servicing
Agreement to reflect such succession as Servicer pursuant to this Section 6.01
shall be paid by the predecessor Servicer upon presentation of reasonable
documentation of such costs and expenses. Termination of JCP&L as Servicer shall
not terminate JCP&L's rights or obligations under the Sale Agreement.
SECTION 6.02 NOTICE OF SERVICER DEFAULT. The Servicer shall deliver to the
Issuer, the Trustee and each Rating Agency promptly after having obtained
knowledge thereof, but in no event later than five Business Days thereafter,
written notice in an Officers' Certificate of any event or circumstance which,
with the giving of notice or the passage of time or both, would become a
Servicer Default under Section 6.01. If any Outstanding Transition Bonds are
listed on the Luxembourg Stock Exchange, such notice shall also be given by
publication in a daily newspaper in Luxembourg, if the rules of the Luxembourg
Stock Exchange so require.
SECTION 6.03 WAIVER OF PAST DEFAULTS. The Trustee, with the consent of the
Holders of not less than a majority of the Outstanding principal balance of the
Transition Bonds of all Series and Classes, voting together as a single class,
may 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 remittances to the Trustee of TBC Collections in accordance with
Section 3.03. 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 Servicing Agreement. No such waiver
shall extend to any subsequent or other default or impair any right consequent
thereto.
SECTION 6.04 APPOINTMENT OF SUCCESSOR.
(a) Upon the Servicer's receipt of a Termination Notice pursuant to
Section 6.01 or the Servicer's resignation in accordance with the terms of this
Servicing Agreement, the predecessor Servicer shall continue to perform its
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functions as Servicer under this Servicing Agreement and shall be entitled to
receive the requisite portion of the Quarterly Servicing Fees, until a Successor
Servicer has assumed in writing the obligations of the Servicer hereunder as
described below. In the event of the Servicer's removal or resignation
hereunder, the Trustee, as assignee of the Issuer, may appoint a Successor
Servicer, with the consent of the Holders of not less than a majority of the
Outstanding principal balance of the Transition Bonds of all Series and Classes,
voting together as a single class, and the Successor Servicer shall accept its
appointment by a written assumption in form acceptable to the Issuer and the
Trustee. If, within thirty days after the delivery of the Termination Notice, a
new Servicer has not been appointed and accepted such appointment, the Trustee,
at the expense of the Issuer, may petition the BPU or a court of competent
jurisdiction to appoint a Successor Servicer under this Servicing Agreement. A
Person shall qualify as a Successor Servicer only if:
(i) such Person is permitted to perform the duties of the Servicer
pursuant to the Competition Act, the BPU Regulations, the Financing Order
and this Servicing Agreement;
(ii) prior notice has been given to the Rating Agencies and the then
current ratings on any Outstanding Transition Bonds shall not be withdrawn
or downgraded by the Rating Agencies; and
(iii) such Person enters into a servicing agreement with the Issuer
having substantially the same provisions as this Servicing Agreement.
(b) Upon appointment, the Successor Servicer shall be the successor in
all respects to the predecessor Servicer under this Servicing Agreement and
shall be subject to all the responsibilities, duties and liabilities arising
thereafter relating thereto placed on the predecessor Servicer and shall be
entitled to the Quarterly Servicing Fee and all the rights granted to the
predecessor Servicer by the terms and provisions of this Servicing Agreement.
(c) The Successor Servicer may resign only if it is prohibited from
serving as such by applicable law.
(d) Only a Successor Servicer that is an electric public utility may
bring an action against a Customer for nonpayment of the Transition Bond Charge,
or terminate service for failure to pay the Transition Bond Charge.
SECTION 6.05 COOPERATION WITH SUCCESSOR. The Servicer covenants and agrees
with the Issuer that it will, on an ongoing basis, cooperate with the Successor
Servicer and provide whatever information is, and take whatever actions are,
reasonably necessary to assist the Successor Servicer in performing its
obligations hereunder.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.01 AMENDMENT.
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(a) Upon five Business Days' prior written notice to the Rating
Agencies, this Servicing Agreement may be amended by the Servicer and the Issuer
with the written consent of the Trustee upon receipt of an Issuer Order, but
without the consent of the Transition Bondholders, to:
(i) cure any ambiguity;
(ii) correct or supplement any provision in this Servicing Agreement;
(iii) add any provisions to or change in any manner or eliminate any
of the provisions of this Servicing Agreement; or
(iv) modify in any manner the rights of the Transition Bondholders;
provided, that such action will not, as certified in an Officers' Certificate of
the Servicer delivered to the Issuer and to the Trustee and the Managers,
adversely affect in any material respect the interest of any Holder of
Transition Bonds then Outstanding.
(b) This Servicing Agreement may be amended by the Servicer and the
Issuer with prior written notice to the Rating Agencies and with the written
consent of the Trustee and the consent of the Holders of not less than a
majority of the Outstanding principal balance of the Transition Bonds of all
Series and Classes affected thereby, voting together as a single class, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Servicing Agreement or of modifying in any manner the
rights of the Transition Bondholders; provided, however, no amendment adopted in
this manner may increase or decrease, or accelerate or delay the timing of,
collection of Transition Bond Charge, or reduce the percentage of Transition
Bondholders required to consent to amendments.
No amendment of the provisions of this Servicing Agreement relating to
the Servicer's remittance and Transition Bond Charge Adjustment obligations will
be permitted absent confirmation from the Rating Agencies that such amendment
will not result in a reduction or withdrawal of the then existing rating of any
Outstanding Transition Bonds by the Rating Agencies (except that with regard to
Moody's it will be sufficient to provide ten days' prior notice of the
amendment).
(c) The Issuer may also amend the servicing procedures provided in this
Servicing Agreement solely to address changes to the Servicer's method of
calculating payments of Transition Bond Charges received as a result of changes
to the Servicer's current computerized information system, if the amendment does
not have a material adverse effect on the Holders of Transition Bonds then
Outstanding, with prior written notice to the Trustee and the Rating Agencies,
but without the consent of the Trustee, any Rating Agency or any Transition
Bondholder. These changes may include changes that would replace remittances
calculated by estimation procedures with remittances of TBC Collections actually
received.
Prior to the execution of any amendment to this Servicing Agreement,
the Issuer and the Trustee shall be entitled to receive and rely upon an Opinion
20
of Counsel stating that the execution of such amendment is authorized or
permitted by this Servicing Agreement and the Opinion of Counsel referred to in
Section 3.06(b) of the Indenture. The Issuer and the Trustee may, but shall not
be obligated to, enter into any such amendment which affects their own rights,
duties or immunities under this Servicing Agreement or otherwise.
SECTION 7.02 NOTICES. Unless otherwise specifically provided herein, all
notices, directions, consents and waivers required under the terms and
provisions of this Servicing Agreement shall be in English and in writing, and
any such notice, direction, consent or waiver may be given by United States
first-class mail, reputable overnight courier service, facsimile transmission or
electronic mail (confirmed by telephone, United States first-class mail or
reputable overnight courier service in the case of notice by facsimile
transmission or electronic mail) or any other customary means of communication,
and any such notice, direction, consent or waiver shall be effective when
delivered or transmitted, or if mailed, five days after deposit in the United
States first-class mail with proper postage for first-class mail prepaid:
(a) in the case of the Servicer, at Jersey Central Power & Light
Company, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇;
(b) in the case of the Issuer, at JCP&L Transition Funding, ▇▇▇ ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, with a copy to JCP&L Transition
Funding LLC c/o GPU Service, Inc., ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇;
(c) in the case of the Trustee, at its Corporate Trust Office;
(d) in the case of Moody's, at ▇▇▇▇▇'▇ Investors Service, Inc., ABS
Monitoring Department, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇;
(e) in the case of S&P, at Standard & Poor's, Structured Finance, ABS
Surveillance Corp., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
Fax: ▇▇▇-▇▇▇-▇▇▇▇; and
(f) in the case of Fitch, at Fitch, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ABS Surveillance;
or, as to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 7.03 LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Servicing Agreement are solely for the benefit of the Servicer, the Issuer and
the Trustee, on behalf of itself and the Transition Bondholders, and nothing in
this Servicing Agreement, whether express or implied, shall be construed to give
to any other Person any legal or equitable right, remedy or claim in any
Collateral or under or in respect of this Servicing Agreement or any covenants,
conditions or provisions contained herein.
SECTION 7.04 SEVERABILITY. Any provision of this Servicing 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
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such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 7.05 SEPARATE COUNTERPARTS. This Servicing Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 7.06 HEADINGS. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 7.07 GOVERNING LAW. THIS SERVICING AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 7.08 ASSIGNMENT TO THE TRUSTEE.
(a) The Servicer hereby acknowledges and consents to any pledge,
assignment and grant of a security interest by the Issuer to the Trustee
pursuant to the Indenture for the benefit of the Transition Bondholders of all
right, title and interest of the Issuer in, to and under the Transferred
Bondable Transition Property owned by the Issuer and the proceeds thereof and
the assignment of any or all of the Issuer's rights hereunder to the Trustee.
(b) In no event shall the Trustee have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the Issuer.
SECTION 7.09 NONPETITION COVENANTS. Notwithstanding any prior termination
of this Servicing Agreement or the Indenture, the Servicer hereby covenants and
agrees that it shall not, prior to the date which is one year and one day after
the termination of the Indenture and the payment in full of the Transition
Bonds, any other amounts owed under the Indenture, including, without
limitation, any amounts owed to third-party credit enhancers, and any amounts
owed by the Issuer under the Interest Rate Swap Agreement, acquiesce, petition
or otherwise invoke or cause the Issuer to invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Issuer under any federal or State bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Issuer or any substantial part of the property of
the Issuer, or ordering the winding up or liquidation of the affairs of the
Issuer.
SECTION 7.10 TERMINATION. This Servicing Agreement shall terminate when
all Transition Bonds have been retired, redeemed or defeased in full.
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IN WITNESS WHEREOF, the parties hereto have caused this Servicing
Agreement to be duly executed and delivered by their respective duly authorized
officers as of the date and year first above written.
JCP&L TRANSITION FUNDING LLC,
as Issuer
By:
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Manager, Senior Vice President
and Chief Executive Officer
JERSEY CENTRAL POWER & LIGHT
COMPANY,
as Servicer
By:
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Senior Vice President
and Chief Executive Officer
Acknowledged and Accepted:
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Trustee on
behalf of the Holders of
the Transition Bonds
By:
-------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Assistant Vice President
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ANNEX 1
TO
SERVICING AGREEMENT
The Servicer agrees to comply with the following with respect to JCP&L
Transition Funding LLC, as Issuer:
SECTION 1. DEFINITIONS. Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in Appendix A to the
Indenture dated as of June 11, 2002 between the Issuer and The Bank of New York,
as Trustee.
SECTION 2. TRUSTEE AND SERVICER PAYMENT DATE STATEMENTS. At least one
Business Day before each date on which distributions to the Trustee and Servicer
are to be made pursuant to Sections 8.02(d) and (e) of the Indenture, the
Servicer shall provide the Trustee with a statement setting forth the amounts to
be distributed to each of the Trustee and Servicer pursuant to such Sections.
SECTION 3. PAYMENT DATE STATEMENTS. At least one Business Day before
each Payment Date, the Servicer shall provide to the Issuer, the Trustee, each
Rating Agency and, for so long as any Transition Bonds are listed on the
Luxembourg Stock Exchange, any listing agent in Luxembourg, a statement
indicating:
1. the amount to be paid to Transition Bondholders of each Series
and Class in respect of principal on such Payment Date in
accordance with Section 8.02 of the Indenture and each Series
Supplement thereto;
2. the amount to be paid to Transition Bondholders of each Series
and Class in respect of interest on such Payment Date in
accordance with Section 8.02 of the Indenture and each Series
Supplement thereto;
3. the Projected Transition Bond Balance and the transition bond
balance for each Series and Class as of that Payment Date (after
giving effect to the payments on such Payment Date);
4. the amount on deposit in the Overcollateralization Subaccount for
each Series and the Scheduled Overcollateralization Level for
each Series, as of that Payment Date (after giving effect to the
transfers to be made from or into the Overcollateralization
Subaccount on such Payment Date);
5. the amount on deposit in the Capital Subaccount for each Series
as of that Payment Date (after giving effect to the transfers to
be made from or into the Capital Subaccount on such Payment
Date);
6. the amount, if any, on deposit in the Reserve Subaccount as of
that Payment Date (after giving effect to the transfers to be
made from or into the Reserve Subaccount on such Payment Date);
7. the amounts to be paid to any Swap Counterparty (on a gross and a
net basis, separately stated) under any Interest Rate Swap
Agreement on or before such Payment Date;
8. the amounts paid to the Trustee since the preceding Payment Date
pursuant to Section 8.02(d) of the Indenture;
9. the amounts paid to or withheld by the Servicer since the
preceding Payment Date pursuant to Section 8.02(e) of the
Indenture; and
10. the amount of any other transfers and payments to be made on such
Payment Date pursuant to Sections 8.02(d), (e), (f), (g) and (i)
of the Indenture.
SECTION 4. REMITTANCE DATE STATEMENTS. At least one Business Day
before each Remittance Date, and in the case of Daily Remittances, on the last
Remittance Date of such month, the Servicer shall prepare and furnish to the
Issuer and the Trustee a statement setting forth the aggregate amount remitted
or to be remitted by the Servicer to the Trustee (net of any payments owed to
the Servicer in accordance with Section 3.03(b) of the Servicing Agreement) for
deposit on such Remittance Date pursuant to the Indenture.
SECTION 5. TRANSITION BOND CHARGE ADJUSTMENTS.
(a) Prior to each Calculation Date, the Servicer shall calculate
(i) the Transition Bond Balance as of such Calculation Date (a
written copy of which shall be delivered by the Servicer to
the Trustee within five Business Days following such
Calculation Date) and
(ii) the revised Transition Bond Charge with respect to the
Transferred Bondable Transition Property in respect of each
Adjustment Date such that the Servicer projects that TBC
Collections therefrom allocable to the Issuer will be
sufficient so that:
(A) the Transition Bond Balance on the Payment Date
immediately preceding the next Adjustment Date will
equal the Projected Transition Bond Balance as of such
date or, if earlier with respect to any Series or Class
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of Transition Bonds, as of the Payment Date immediately
preceding the Expected Final Payment Date therefor;
(B) the amount on deposit in the Overcollateralization
Subaccount on the Payment Date immediately preceding
the next Adjustment Date will equal the Scheduled
Overcollateralization Level for such date or, if
earlier with respect to any Series or Class of
Transition Bonds, as of the Payment Date immediately
preceding the Expected Final Payment Date therefor;
(C) the amount on deposit in the Capital Subaccount on the
Payment Date immediately preceding the next Adjustment
Date will equal its required level for such date or, if
earlier with respect to any Series or Class of
Transition Bonds, as of the Payment Date immediately
preceding the Expected Final Payment Date therefor;
(D) the amount on deposit in the Reserve Subaccount on the
Payment Date immediately preceding the next Adjustment
Date, will equal zero; and
(E) the TBC Collections will provide for (i) amortization
of the remaining outstanding principal balance of each
Series in accordance with the Expected Amortization
Schedule therefor, (ii) payment of interest on each
Series when due and payment of any amounts (other than
termination or breakage amounts) under any Interest
Rate Swap Agreement, (iii) payment of all Operating
Expenses of the Issuer when due in accordance with the
Indenture and (iv) deposits to the
Overcollateralization Subaccount such that the balance
therein will equal the Scheduled Overcollateralization
Level on each Payment Date.
(b) On each Calculation Date, the Servicer shall file an Adjustment
Request with the BPU. This filing shall include the data
specified in the Petition and the Financing Order.
(c) On each Adjustment Date, the Servicer shall
(i) take all reasonable actions and make all reasonable efforts
to effectuate all adjustments to the Transition Bond Charge
either approved by the BPU or effective on an interim basis
pending final approval and
(ii) promptly send to the Trustee copies of all material notices
and documents relating to such adjustments.
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(d) On each Adjustment Date, the Servicer shall provide Moody's with
a schedule indicating any changes to the Transition Bond Charge.
(e) If deemed appropriate by the Servicer to protect Transition
Bondholders to remedy a significant and recurring variance
between actual and expected TBC Collections, as authorized by the
Financing Order, the Servicer shall make "non-routine"
adjustments to the Transition Bond Charge and the MTC-Tax (as
defined in the Financing Order) to accommodate material changes
to the methodology described in Attachment E-3 to Revised
Exhibit E of the Petition. Such filings shall be made at least
thirty days prior to the proposed effective date of the proposed
adjustments.
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EXHIBIT A
SERVICING PROCEDURES
The Servicer agrees to comply with the following servicing procedures:
SECTION 1. DEFINITIONS.
(a) Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in Appendix A to the Indenture dated
as of June 11, 2002 between the Issuer and The Bank of New York,
as Trustee.
(b) Whenever used in this Exhibit A, the following words and phrases
shall have the following meanings:
ADJUSTMENT REQUEST has, with respect to the Issuer, the meaning given
to such term in Appendix A.
APPLICABLE MDMA means, with respect to each Customer, the meter data
management agent or Third Party providing meter reading services for
that Customer's account.
APPLICABLE THIRD PARTY means, with respect to each Customer, the Third
Party, if any, providing billing or metering services to that
Customer.
BILLED TRANSITION BOND CHARGES means the amounts billed to Customers
pursuant to the Transition Bond Charge, whether billed directly to
such Customers by the Servicer or indirectly through a Third Party
pursuant to Consolidated Third Party Billing.
BILLS means each of the regular monthly bills, the summary bills, the
opening bills and the Closing Bills issued to Customers or Third
Parties by JCP&L.
BUDGET PAYMENT PLAN means a levelized payment plan offered by JCP&L,
which, if elected by a Customer, provides for level monthly ▇▇▇▇
charges to such Customer. For residential Customers, this charge is
calculated by calculating actual electricity charges for the previous
year and dividing this amount by twelve. The number which results from
this calculation is charged to the residential Customer each month. In
the twelfth month, JCP&L bills the residential Customer for actual use
in that month, adjusted for any excess or deficit the Customer has
paid JCP&L over the prior eleven months. If the Customer owes JCP&L $4
or more over the normal budget amount, that Customer has the option of
repaying the full amount in the twelfth month, or spreading the amount
of this deficit in equal installments over the first four months of
the Customer's next budget year. The procedure is similar for small
industrial and commercial Customers.
CLOSING ▇▇▇▇ means the final ▇▇▇▇ issued to a Customer at the time
service is terminated.
CONSOLIDATED THIRD PARTY BILLING means the billing option available to
Customers served by a Third Party pursuant to which such Third Party
will be responsible for billing and collecting all charges to
Customers electing such billing option, including the Transition Bond
Charge, and will become obligated to the Servicer for the Billed
Transition Bond Charges, all in accordance with applicable BPU
Regulations and the Financing Order.
NET WRITE-OFF PERCENT means the number (expressed as a percent) equal
to
(i) the amount by which Write-Offs attributable to a particular
billing period exceed Write-Off recoveries attributable to
such billing period, divided by
(ii) the total billed revenue attributable to such billing
period.
SERVICER POLICIES AND PRACTICES means, with respect to the Servicer's
duties under this Exhibit A, the policies and practices of the
Servicer applicable to such duties that the Servicer follows with
respect to comparable assets that it services for itself.
TRANSITION BOND CHARGE EFFECTIVE DATE means the date on which the
initial Transition Bond Charge goes into effect pursuant to the
Financing Order.
VARIABLES includes the following variables used in calculating
Adjustment Requests:
(i) the estimated Net Write-Off Percent; and
(ii) the projected billed consumption to which the Transition
Bond Charge applies.
WRITE-OFFS means arrears that remain unpaid by Customers generally as
of ninety days after the issuance of the Closing Bills containing such
charges, unless payment arrangements are made and are being kept.
SECTION 2. DATA ACQUISITION.
(a) Installation and Maintenance of Meters. Except to the extent that
a Third Party is responsible for such services, the Servicer
shall use its best efforts to cause to be installed, replaced and
maintained meters in such places and in such condition as will
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enable the Servicer to obtain usage measurements for each
Customer approximately every thirty days or as provided in the
applicable tariff.
(b) Meter Reading. At least once each calendar month, the Servicer
shall obtain usage measurements from the Applicable MDMA for each
Customer; provided, however, that the Servicer may determine any
Customer's usage on the basis of estimates in accordance with
applicable BPU Regulations.
(c) Cost of Metering. The Issuer shall not be obligated to pay any
costs associated with the metering duties set forth in this
Section 2, including, but not limited to, the costs of
installing, replacing and maintaining meters, nor shall the
Issuer be entitled to any credit against the Servicing Fee for
any cost savings realized by the Servicer or any Third Party as a
result of new metering and/or billing technologies.
SECTION 3. USAGE AND ▇▇▇▇ CALCULATION.
The Servicer shall obtain a calculation of each Customer's usage
(which may be based on data obtained from such Customer's meter read or on usage
estimates determined in accordance with applicable BPU Regulations) at least
once each calendar month and shall determine therefrom each Customer's
individual charge relating to the Transition Bond Charge to be included on such
Customer's ▇▇▇▇ pursuant to the Financing Order and BPU Regulations.
SECTION 4. BILLING.
The Servicer shall implement the Transition Bond Charge as of the
Transition Bond Charge Effective Date and shall thereafter ▇▇▇▇ each Customer or
the Applicable Third Party for the respective Customer's outstanding current and
past due charges relating to the Transition Bond Charge, accruing until all
payments of principal and interest on each Series of Transition Bonds and all
other costs and expenses related to such Series have been paid in accordance
with the Indenture, all in accordance with the following:
(a) Frequency of Bills; Billing Practices. In accordance with the
Servicer's then-existing Servicer Policies and Practices, as such
Servicer Policies and Practices may be modified from time to
time, the Servicer shall generate and issue a ▇▇▇▇ to each
Customer, or, in the case of a Customer who has elected
Consolidated Third Party Billing, to an Applicable Third Party,
for such Customer's respective Transition Bond Charge as a
general practice once approximately every thirty days or such
other time period as allowed by the BPU, at the same time, with
the same frequency and on the same ▇▇▇▇ as that containing the
Servicer's own charges to such Customer or Third Party, as the
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case may be. In the event that the Servicer makes any material
modification to these practices, it shall notify the Issuer, the
Trustee and the Rating Agencies as soon as practicable, and in no
event later than sixty Business Days after such modification goes
into effect; provided, however, that
(i) the Servicer may not make any modification that will
materially adversely affect the Transition Bondholders and
(ii) the Rating Agencies shall receive prior notice of any
modification that would change the frequency with which
Bills are issued or would change any tariff charged.
(b) Format.
(i) Each ▇▇▇▇ to a Customer shall contain the charge
corresponding to the Transition Bond Charge owed by such
Customer for the billing period. The Customer's ▇▇▇▇ will
contain in text or in a footnote, text substantially to the
effect that a portion of the monthly charge representing
that Bondable Transition Property is being collected on
behalf of the Issuer as owner of the Bondable Transition
Property.
(ii) In the case of each Customer that has elected Consolidated
Third Party Billing, the Servicer shall deliver to the
Applicable Third Party itemized charges for such Customer
including the amount of such Customer's Transition Bond
Charge to be remitted by the Servicer to the Issuer.
(iii) The Servicer shall conform to such requirements in respect
of the format, structure and text of Bills delivered to
Customers and Third Parties as applicable BPU Regulations
shall from time to time prescribe. To the extent that ▇▇▇▇
format, structure and text are not prescribed by the
Competition Act, other applicable law or BPU Regulations,
the Servicer shall, subject to clauses (i) and (ii) above,
determine the format, structure and text of all Bills in
accordance with its reasonable business judgment, its
Servicer Policies and Practices with respect to its own
charges and prevailing industry standards.
(c) Delivery. The Servicer shall deliver all Bills to Customers
(i) by United States mail in such class or classes as are
consistent with the Servicer Policies and Practices followed
by the Servicer with respect to its own charges or
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(ii) by any other means, whether electronic or otherwise, that
the Servicer may from time to time use to present its own
charges to its Customers.
In the case of Customers that have elected Consolidated Third Party
Billing, the Servicer shall deliver all Bills to the Applicable Third
Parties by such means as are prescribed by applicable BPU Regulations, or,
if not prescribed by applicable BPU Regulations, by such means as are
mutually agreed upon by the Servicer and the Applicable Third Party and are
consistent with BPU Regulations. The Servicer or a Third Party, as
applicable, shall pay from its own funds all costs of issuance and delivery
of all Bills, including but not limited to printing and postage costs as
the same may increase or decrease from time to time.
SECTION 5. CUSTOMER SERVICE FUNCTIONS.
The Servicer shall handle all Customer inquiries and other Customer
service matters according to the same procedures it uses to service Customers
with respect to its own charges.
SECTION 6. COLLECTIONS; PAYMENT PROCESSING; REMITTANCE.
(a) Collection Efforts; Policies; Procedures.
(i) The Servicer shall use reasonable efforts to collect all
Billed Transition Bond Charges from Customers and Third
Parties as and when the same become due and shall follow
such collection procedures as it follows with respect to
comparable assets that it services for itself or others,
including, as follows:
(A) The Servicer shall prepare and deliver overdue notices
to Customers and Third Parties in accordance with
applicable BPU Regulations and the Servicer Policies
and Practices.
(B) The Servicer shall apply late payment charges to
outstanding Customer and Third Party balances in
accordance with applicable BPU Regulations. All late
payment charges and interest collected shall be payable
to and retained by the Servicer as a component of its
compensation under the Servicing Agreement, and the
Issuer shall not have any right to share in the same.
(C) The Servicer shall deliver verbal and written final
call notices in accordance with applicable BPU
Regulations and Servicer Policies and Practices.
(D) The Servicer shall adhere and carry out disconnection
policies in accordance with the Competition Act, other
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applicable law and BPU Regulations and Servicer
Policies and Practices.
(E) The Servicer may employ the assistance of collections
agents in accordance with applicable BPU Regulations
and Servicer Policies and Practices.
(F) The Servicer shall apply Customer and Third Party
deposits, Customers' letters of credit and Customer
posted surety bonds to the payment of delinquent
accounts in accordance with applicable BPU Regulations
and Servicer Policies and Practices and according to
the priorities set forth in Sections 6(b)(ii), (iii)
and (iv) of this Exhibit A.
(G) The Servicer shall promptly take all necessary action
in accordance with applicable BPU Regulations to
terminate billing of Transition Bond Charges by Third
Parties whose payments are twenty-two or more days
delinquent, or as the then current BPU Regulations and
any billing services agreements allow, and to resume,
prospectively, to collect the Billed Transition Bond
Charges directly from the applicable Customers. At such
time, the Servicer will apply the Third Party's
security deposit to satisfy charges billed previously
by the Third Party which remain outstanding, including
outstanding Transition Bond Charges.
(ii) The Servicer shall not waive any late payment charge or any
other fee or charge relating to delinquent payments, if any,
or waive, vary or modify any terms of payment of any amounts
payable by a Customer, in each case unless such waiver or
action:
(A) would be in accordance with the Servicer's customary
practices or those of any Successor Servicer with
respect to comparable assets that it services for
itself and for others;
(B) would not materially adversely affect the rights of the
Transition Bondholders; and
(C) would comply with applicable law; provided, however,
that notwithstanding anything in the Servicing
Agreement or this Exhibit A to the contrary, the
Servicer is authorized to write off any Billed
Transition Bond Charges, in accordance with its
Servicer Policies and Practices.
(iii) The Servicer shall accept payment from Customers in respect
of Billed Transition Bond Charges in such forms and methods
and at such times and places as it accepts for payment of
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its own charges. The Servicer shall accept payment from
Third Parties in respect of Billed Transition Bond Charges
in such forms and methods and at such times and places as
the Servicer and each Third Party shall mutually agree in
accordance with applicable BPU Regulations.
(b) Payment Processing; Allocation; Priority of Payments.
(i) The Servicer shall post all payments received to Customer
accounts as promptly as practicable, and, in any event,
substantially all payments shall be posted no later than two
Business Days after receipt.
(ii) Subject to clause (iii) below, the Servicer shall apply
payments received to each Customer's or Third Party's
account in proportion to the charges contained on the
outstanding ▇▇▇▇ to such Customer or Third Party.
(iii) Any amounts collected by the Servicer that represent
partial payments of the total ▇▇▇▇ to a Customer or Third
Party shall be allocated in accordance with the priorities
set forth in Section 3.02(b) of the Servicing Agreement.
(iv) The Servicer shall hold all over-payments for the benefit of
the Issuer and shall apply such funds to future ▇▇▇▇ charges
in accordance with clauses (ii) and (iii) above as such
charges become due.
(v) For Customers on a Budget Payment Plan, the Servicer shall
treat TBC Collections received from such Customers as if
such Customers had been billed for the Transition Bond
Charge in the absence of the Budget Payment Plan. Partial
payment of a Budget Payment Plan payment shall be allocated
according to clause (iii) above, and overpayment of a Budget
Payment Plan payment shall be allocated according to clause
(iv) above.
(c) Accounts; Records.
(i) The Servicer shall maintain accounts and records as to the
Transferred Bondable Transition Property accurately and in
accordance with its standard accounting procedures and in
sufficient detail to permit reconciliation between payments
or recoveries with respect to the Transferred Bondable
Transition Property and the amounts from time to time
remitted to the Collection Account in respect of the
Transferred Bondable Transition Property.
(ii) The Servicer shall maintain accounts and records as to Third
Parties performing Consolidated Third Party Billing for
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Customers accurately and in accordance with its standard
accounting procedures and in sufficient detail to permit
reconciliation between payments or recoveries with respect
to the Transferred Bondable Transition Property and amounts
owed by such Customers in respect of the Transition Bond
Charge.
(d) Investment of TBC Collections. Prior to remittance on the
applicable Remittance Date, the Servicer may invest TBC
Collections received at its own risk and for its own benefit, and
such investments and funds shall not be required to be segregated
from the other investments and funds of the Servicer.
(e) Calculation of Collections; Determination of Aggregate Remittance
Amount.
(i) On or before each Remittance Date, the Servicer shall
calculate the total TBC Collections received by the Servicer
from or on behalf of Customers during prior Collection
Periods in respect of all previously Billed Transition Bond
Charges.
(ii) In accordance with Section 4.01 of the Servicing Agreement
and Annex 1, the Servicer shall update the Variables and
shall prepare Adjustment Requests to reflect the updated
Variables when required to do so pursuant to Annex 1.
(f) Remittances.
(i) The Servicer shall make remittances to the Issuer in
accordance with Section 5.11 of the Servicing Agreement.
(ii) In the event of any change of account or change of
institution affecting the remittances, the Issuer shall
provide written notice thereof to the Servicer by the
earlier of
(A) five Business Days from the effective date of such
change, or
(B) five Business Days prior to the next applicable
Remittance Date.
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