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MASTER SERVICING
AGREEMENT
between
PECO ENERGY TRANSITION TRUST,
the other Issuers from
time to time party hereto
and
PECO ENERGY COMPANY
Servicer
Dated as of March 25, 1999
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TABLE OF CONTENTS
Page
ARTICLE I
Definitions
SECTION 1.01. Definitions....................................................2
SECTION 1.02. Other Definitional Provisions.................................12
ARTICLE II
Appointment and Authorization of Servicer
SECTION 2.01. Appointment of Servicer; Acceptance of
Appointment..................................................13
SECTION 2.02. Authorization.................................................13
SECTION 2.03. Dominion and Control over Serviced
Intangible Transition Property...............................14
ARTICLE III
Billing Services
SECTION 3.01. Duties of Servicer............................................15
SECTION 3.02. Collection and Allocation of Intangible
Transition Charges...........................................17
SECTION 3.03. Servicing and Maintenance Standards...........................19
SECTION 3.04. Servicer's Certificates.......................................20
SECTION 3.05. Annual Statement as to Compliance;
Notice of Default............................................20
SECTION 3.06. Annual Independent Certified Public
Accountants' Report..........................................21
SECTION 3.07. Intangible Transition Property
Documentation................................................22
SECTION 3.08. Computer Records; Audits of
Documentation................................................23
SECTION 3.09. Defending Intangible Transition
Property Against Claims......................................25
SECTION 3.10. Opinions of Counsel...........................................25
ARTICLE IV
Services Related to Intangible
Transition Charges Adjustments
SECTION 4.01. Intangible Transition Charges
Adjustments..................................................27
Contents, p. ii
ARTICLE V
The Servicer
SECTION 5.01. Representations and Warranties
of Servicer..................................................27
SECTION 5.02. Indemnities of Servicer; Release
of Claims....................................................31
SECTION 5.03. Merger or Consolidation of, or
Assumption of the Obligations
of, Servicer.................................................34
SECTION 5.04. Assignment of Servicer's Obligations..........................36
SECTION 5.05. Limitation on Liability of Servicer
and Others...................................................36
SECTION 5.06. PECO Energy Not To Resign as Servicer.........................37
SECTION 5.07. Monthly Servicing Fee.........................................38
SECTION 5.08. Servicer Expenses.............................................39
SECTION 5.09. Appointments..................................................39
SECTION 5.10. Remittances...................................................40
SECTION 5.11. Servicer Advances.............................................41
SECTION 5.12. Protection of Title...........................................41
ARTICLE VI
Servicer Default
SECTION 6.01. Servicer Default..............................................42
SECTION 6.02. Notice of Servicer Default....................................45
SECTION 6.03. Waiver of Past Defaults.......................................46
SECTION 6.04. Appointment of Successor......................................46
SECTION 6.05. Cooperation with Successor....................................48
ARTICLE VII
Miscellaneous Provisions
SECTION 7.01. Amendment.....................................................48
SECTION 7.02. Notices.......................................................49
SECTION 7.03. Assignment....................................................50
SECTION 7.04. Limitations on Rights of Others...............................50
SECTION 7.05. Severability..................................................50
SECTION 7.06. Separate Counterparts.........................................51
SECTION 7.07. Headings......................................................51
SECTION 7.08. Governing Law.................................................51
SECTION 7.09. Assignment to Bond Trustee....................................51
SECTION 7.10. Nonpetition Covenants.........................................52
SECTION 7.11. Addition of Issuers...........................................53
SECTION 7.12. Termination by Issuers........................................53
SECTION 7.13. Limitation of Liability of Trustee............................53
Contents, p. iii
EXHIBIT A Servicing Procedures
EXHIBIT B Supplement for Addition of Issuer
ANNEX 1 ITC Adjustment Process and Reports - PECO
Energy Transition Trust
1
MASTER SERVICING AGREEMENT dated as of March 25, 1999, between PECO ENERGY
TRANSITION TRUST, a Delaware business trust (the "First Issuer"), the other
Issuers from time to time party hereto (together with the First Issuer, the
"Issuers"), and PECO ENERGY COMPANY, a Pennsylvania corporation, as the servicer
of the Intangible Transition Property (together with each successor to PECO
ENERGY COMPANY (in the same capacity) pursuant to Section 5.03 or 6.02, the
"Servicer").
WHEREAS the Servicer is willing to service the Intangible Transition
Property purchased from the Seller by each Issuer; and
WHEREAS each Issuer, in connection with ownership of Serviced Intangible
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 intending to be legally bound hereby, the parties hereto
agree as follows:
2
ARTICLE I
Definitions
SECTION 1.01. Definitions. Whenever used in this Agreement, each of the
following words and phrases shall have the following meaning:
"Agreement" means this Master Servicing Agreement, as the same may be
amended and supplemented from time to time.
"Annual Accountant's Report" has the meaning specified in Section 3.06(a)
"Bond Trustees" means, collectively, The Bank of New York, a New York
banking corporation, as bond trustee under the Indenture to which the First
Issuer is a party, and each other Person serving as a bond trustee or in a
similar capacity under any of the other Indentures, or any successors to any of
the foregoing.
"Business Day" means any day other than a Saturday, Sunday or a day on
which banking institutions in the City of New York, the City of Philadelphia or
the State of Delaware are required by law or executive order to remain closed.
"Class" means, with respect to any Series, any one of the classes of
Transition Bonds of that Series.
"Collateral" means, with respect to an Issuer, all property of such Issuer
pledged by it to secure Transition
3
Bonds issued by such Issuer as provided in the Indenture to which it is a
party.
"Collection Period" means the period from and including the first day of a
calendar month to and including the last day of the same calendar month.
"Competitive Transition Charges" means the competitive transition charges
that PECO Energy may impose on Customers as set forth in Appendix A to the Joint
Petition for Approval of Full Settlement of PECO Energy Company's Restructuring
Plan and Related Appeals and approved in the Final Order issued on May 14, 1998
by the PUC with respect to PECO Energy's restructuring plan.
"Counterparty" means any counterparty to a Swap Agreement entered into by
any Issuer.
"Customers" means each person that (i) was a customer of PECO Energy
located within PECO Energy's retail electric service territory on January 1,
1997 or that became a customer of electric services within such territory after
January 1, 1997, (ii) is still located within such territory, and (iii) is in a
Rate Class that has been assigned stranded cost responsibility.
"Duff" means Duff & ▇▇▇▇▇▇ Credit Rating Company or its successor.
"Fitch IBCA" means Fitch IBCA, Inc. or its successor.
4
"Formation Documents" means, collectively, the Amended and Restated Trust
Agreement of the First Issuer dated as of February 19, 1999, among the Seller
and the trustees named therein, and any other trust agreement, certificate of
incorporation, limited liability company agreement, partnership agreement, or
other document pursuant to which any other Issuer is formed or governed, in each
case, as the same may be amended and supplemented from time to time.
"Holder" or "Transition Bondholder" means the Person in whose name a
Transition Bond of any Series or Class is registered as provided in the
Indenture therefor.
"Indentures" means, collectively, the indenture dated as of March 1, 1999,
between the First Issuer and The Bank of New York, and each indenture entered
into by any other Issuer in connection with the issuance of Transition Bonds, in
each case as the same may be amended and supplemented from time to time,
including by any Series Supplement.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable Federal or state bankruptcy, insolvency or
other similar law now or
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hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or ordering the winding-up or liquidation of
such Person's affairs, and such decree or order shall remain unstayed and in
effect for a period of 90 consecutive days or (b) the commencement by such
Person of a voluntary case under any applicable Federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or the consent by
such Person to the entry of an order for relief in an involuntary case under any
such law, or the consent by such Person to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official for such Person or for any substantial part of its
property, or the making by such Person of any general assignment for the benefit
of creditors, or the failure by such Person generally to pay its debts as such
debts become due, or the taking of action by such Person in furtherance of any
of the foregoing.
"Intangible Transition Charges" means the amounts authorized by the PUC to
be imposed on all Customer bills with respect to the Intangible Transition
Property and collected, through a non-bypassable mechanism, by the Seller or its
successor or by any other entity which provides
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electric service to Customers, to recover Qualified Transition Expenses
pursuant to the Qualified Rate Order.
"Intangible Transition Charges Adjustment" means each adjustment to
Intangible Transition Charges related to the Serviced Intangible Transition
Property made in accordance with Section 4.01 and the Issuer Annexes or in
connection with the redemption by any Issuer of Transition Bonds.
"Intangible Transition Property" means the irrevocable right of the Seller
or its successor or assignee to collect Intangible Transition Charges from
Customers to recover the Qualified Transition Expenses described in the
Qualified Rate Order, including all right, title and interest of the Seller or
its successor or assignee in such order and in all revenues, collections,
claims, payments, money or proceeds of or arising from Intangible Transition
Charges pursuant to such order, and all proceeds of any of the foregoing.
"Intangible Transition Property Documentation" has the meaning assigned to
that term in Section 3.07
"Issuer Annex" means, with respect to the First Issuer, Annex 1 hereto, and
with respect to any other Issuer, an Annex hereto describing the statements and
certificates to be provided by the Servicer and the procedures regarding
Intangible Transition Charges
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Adjustments to be followed by the Servicer with respect to such Issuer.
"Issuers" means, collectively, the First Issuer and each other Person from
time to time named as an Issuer in this Agreement, in each case each until a
successor replaces it and, thereafter, such successor.
"ITC Collections" means amounts collected in respect of Intangible
Transition Charges or the Intangible Transition Property.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind.
"Losses" means collectively, any and all liabilities, obligations, losses,
damages, payments, costs or expenses of any kind whatsoever.
"Monthly Allocation Date" means the first day of each calendar month or,
if any such day is not a Business Day, the immediately succeeding Business Day.
"Monthly Servicing Fee" means, with respect to any Series of Transition
Bonds, the fee payable to the Servicer on each Monthly Allocation Date for
services rendered, determined pursuant to Section 5.07.
"Moody's" means ▇▇▇▇▇'▇ Investors Service Inc., or its successor.
"Mortgage" means the First and Refunding Mortgage, dated May 1, 1923
between the Counties Gas and Electric
8
Company (to which PECO Energy is successor) and Fidelity Trust Company (to
which First Union National Bank is successor), as trustee, as supplemented and
amended by 96 supplemental indentures.
"Officers' Certificate" means a certificate signed by (a) the chairman of
the board, the president, the vice chairman of the board, the executive vice
president or any vice president and (b) a treasurer, assistant treasurer,
secretary or assistant secretary, in each case of the Servicer.
"Operating Expenses" means, with respect to any Issuer, all fees, costs,
expenses and indemnity payments owed by such Issuer, including all amounts owed
by such Issuer to a Bond Trustee or any other trustee of such Issuer, the
Monthly Servicing Fee payable in respect of Transition Bonds issued by such
Issuer, legal fees and expenses of the Servicer allocated to such Issuer
pursuant to Section 3.09 and legal and accounting fees, costs and expenses of
such Issuer and any trustee of such Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who may
be an employee of or counsel to the Seller or the Servicer, which counsel shall
be reasonably acceptable to the Bond Trustees, the Issuers or the Rating
Agencies, as applicable, and shall be in form reasonably satisfactory to the
Bond Trustee, if applicable.
9
"PECO Energy" means PECO Energy Company, a Pennsylvania corporation.
"Percentage" means, with respect to any Issuer and any Collection Period,
the percentage equivalent of a fraction, the numerator of which is the aggregate
Intangible Transition Charges (as adjusted from time to time) scheduled to be
collected in such Collection Period applicable to all Series of Transition Bonds
issued by such Issuer and the denominator of which is the aggregate Intangible
Transition Charges (as adjusted from time to time) scheduled to be collected in
such Collection Period applicable to all Series of Transition Bonds issued by
all the Issuers.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), business trust, unincorporated organization or government or any
agency or political subdivision thereof.
"PUC" means the Pennsylvania Public Utility Commission or any successor.
"PUC Regulations" means any regulations promulgated or adopted by the PUC.
"Qualified Rate Order" means the order of the PUC issued on May 14, 1998,
adopted in accordance with the Statute, which, among other things, creates the
Intangible Transition Property and authorizes the imposition and
10
collection of the Intangible Transition Charges by PECO Energy or its
assignee.
"Qualified Transition Expenses" has the meaning assigned to that term in
the Qualified Rate Order.
"Rate Class" means each of the rate classes into which Customers are
divided as of the date hereof, as such rate classes may be reconfigured from
time to time.
"Rating Agency" means any rating agency rating the Transition Bonds of any
Class or Series at the time of issuance thereof at the request of the Issuer of
such Class or Series. If no such organization or successor is any longer in
existence, "Rating Agency" shall be a nationally recognized statistical rating
organization or other comparable Person designated by an Issuer, notice of which
designation shall be given to the Bond Trustee under the Indenture to which such
Issuer is a party, any trustee of such Issuer and the Servicer.
"Rating Agency Condition" means, with respect to any action, the
notification in writing by each Rating Agency to the Seller, the Servicer, the
Bond Trustees and the applicable Issuer that such action will not result in a
reduction or withdrawal of the then current rating by such Rating Agency of any
outstanding Series or Class of Transition Bonds issued by such Issuer.
11
"Released Parties" has the meaning specified in Section 5.02(e).
"Remittance Date" means each date on which ITC Collections allocated to any
Issuer are to be remitted by the Servicer to the Bond Trustee for such Issuer
pursuant to Section 5.10.
"Sale Agreements" means, collectively, the Intangible Transition Property
Sale Agreement dated March 25, 1999, between the Seller and the First Issuer,
and any other agreements between the Seller and any other Issuer relating to the
sale of Intangible Transition Property to such Issuer.
"Seller" means PECO Energy and its successors in interest to the extent
permitted hereunder.
"Series" means any series of Transition Bonds issued by any of the Issuers.
"Series Supplement" means an indenture supplemental to an Indenture that
authorizes a particular Series of Transition Bonds.
"Serviced Intangible Transition Property" means, collectively, all
Intangible Transition Property sold, conveyed, assigned or otherwise transferred
to any Issuer by the Seller or, with respect to an Issuer, all Intangible
Transition Property sold, conveyed, assigned or otherwise transferred to such
Issuer by the Seller.
12
"Servicer Default" means an event specified in Section 6.01.
"Servicing Fee Rate" means, with respect to any Series of Transition Bonds,
the per annum rate specified in the Series Supplement pursuant to which such
Transition Bonds are issued.
"Standard & Poor's means Standard & Poor's Rating Group, or its successor.
"Statute" means the Pennsylvania Electricity Generation Customer Choice and
Competition Act, Chapter 28 of Title 66 of the Pennsylvania Consolidated
Statutes, 66 Pa. C.S., ss.2801, et seq.
"Swap Agreement" means any interest rate swap agreement or agreement with
respect to any hedge or similar transaction entered into by any Issuer
"Termination Notice" has the meaning specified in Section 6.01(d).
"Third Party" means any third party, including any electric generation
supplier, providing billing or metering services, licensed by the PUC pursuant
to relevant provisions of the Statute and any PUC order.
"Transfer Date" means each date on which the Seller sells, conveys, or
otherwise transfers any Intangible Transition Property to any
Issuer.
13
"Transition Bonds" means "transition bonds" (as defined in the Statute)
issued by any Issuer.
"UCC" means, unless the context otherwise requires, the Uniform Commercial
Code, as in effect in the relevant jurisdiction, as amended from time to time.
SECTION 1.02. Other Definitional Provisions. (a) The words "hereof",
"herein", "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement; Section, Annex, Schedule and Exhibit references contained in
this Agreement are references to Sections, Annexes, Schedules and Exhibits in or
to this Agreement unless otherwise specified; and the term "including" shall
mean "including without limitation".
(b) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
ARTICLE II
Appointment and Authorization of Servicer
SECTION 2.01. Appointment of Servicer; Acceptance of Appointment. Subject
to Section 5.04 and Article VI, each Issuer hereby appoints the Servicer, and
the Servicer hereby accepts such appointment, to perform the Servicer's
obligations pursuant to this Agreement on behalf of and for
14
the benefit of each Issuer in accordance with the terms of this Agreement.
This appointment and the Servicer's acceptance thereof may not be revoked except
in accordance with the express terms of this Agreement.
SECTION 2.02. Authorization. With respect to all or any portion of the
Serviced Intangible Transition Property, the Servicer shall be, and hereby is,
authorized and empowered by each Issuer to (a) execute and deliver, on behalf of
itself or such Issuer, as the case may be, any and all instruments, documents or
notices, and (b) on behalf of itself or such Issuer, as the case may be, make
any filing and participate in proceedings of any kind with any governmental
authorities, including with the PUC. Each Issuer shall furnish the Servicer with
such documents as have been prepared by the Servicer for execution by such
Issuer, and with such other documents as may be in such Issuer's possession, as
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder. Upon the written request of the Servicer, each
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 Serviced Intangible Transition
Property. Notwithstanding any other
15
provision herein, the Servicer and each Issuer agree that such Issuer
shall have dominion and control over its respective Serviced Intangible
Transition Property, and the Servicer, in accordance with the terms hereof, is
acting solely as the servicing agent of such Issuer with respect to the Serviced
Intangible Transition Property owned by such Issuer. The Servicer hereby agrees
that it shall not take any action that is not authorized by this Agreement, that
is not consistent with its customary procedures and practices, or that shall
impair the rights of any Issuer in its respective Serviced Intangible 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 each Issuer
(to the extent provided herein), shall have the following duties:
(a) Duties of Servicer Generally. The Servicer will manage,
service, administer and make collections in respect of the Serviced
Intangible Transition Property. The Servicer's duties will include
(i) calculating and billing the Intangible Transition Charges and
collecting (from Customers and Third Parties, as applicable) and
posting all ITC
16
Collections; (ii) responding to inquiries by Customers, Third
Parties, the PUC, or any Federal, local or other state governmental
authorities with respect to the Serviced Intangible Transition
Property and Intangible Transition Charges; (iii) accounting for ITC
Collections, investigating delinquencies, processing and depositing
collections and making periodic remittances, furnishing periodic
reports to the Issuers, the Bond Trustees and the Rating Agencies;
(iv) selling, as the agent for each Issuer, as its interest may
appear, defaulted or written off accounts in accordance with the
Servicer's usual and customary practices; and (v) taking action in
connection with Intangible Transition Charge Adjustments as set
forth herein. Anything to the contrary notwithstanding, the duties
of the Servicer set forth in this Agreement shall be qualified in
their entirety by any PUC Regulations as in effect at the time such
duties are to be performed. Without limiting the generality of this
Section 3.01(a), in furtherance of the foregoing, the Servicer
hereby agrees that it shall also have, and shall comply with, the
duties and responsibilities relating to data acquisition, usage and
▇▇▇▇ calculation, billing, customer service functions,
17
collections, payment processing and remittance set forth in
Exhibit A hereto.
(b) Notification of Laws and Regulations. The Servicer shall
immediately notify the Issuers, the Bond Trustees and the Rating
Agencies in writing of any laws or PUC Regulations hereafter
promulgated that have a material adverse effect on the Servicer's
ability to perform its duties under this Agreement.
(c) Other Information. Upon the reasonable request of any
Issuer, any Bond Trustee or any Rating Agency, the Servicer shall
provide to such Issuer, such Bond Trustee or such Rating Agency, as
the case may be, any public financial information in respect of the
Servicer, or any material information regarding the Intangible
Transition Property to the extent it is reasonably available to the
Servicer, as may be reasonably necessary and permitted by law for
such Issuer, such Bond Trustee or such Rating Agency 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 each Issuer and each Bond Trustee, within a reasonable
time after written request therefor, any information available to
the Servicer or reasonably obtainable by
18
it that is necessary to calculate the Intangible Transition
Charges applicable to each Rate Class.
SECTION 3.02. Collection and Allocation of Intangible Transition Charges.
(a) The Servicer shall use all reasonable efforts consistent with its customary
servicing procedures to collect all amounts owed in respect of Intangible
Transition Charges as and when the same shall become due and shall follow such
collection procedures as it follows with respect to collection activities that
the Servicer conducts for itself or others. The Servicer shall not change the
amount of or reschedule the due date of any scheduled payment of Intangible
Transition Charges, except as contemplated in this Agreement or as required by
law or court or PUC order; 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 it conducts for itself.
(b) Any amounts received by the Servicer from a Customer that
represent a partial payment toward an outstanding balance will be applied
first to state tax charges, then Intangible Transition Charges, then to
Competitive Transition Charges, then to transmission and distribution
charges and finally to electric generation charges. Notwithstanding the
foregoing, when PECO Energy is
19
providing billing for its transmission and distribution charges
which is separate from billing for generation, any amounts received from
Customers remitting partial payments will be applied in the following
priority: (i) to the outstanding balance before direct access to electric
generation from electric generation suppliers or the installment amount
for a payment agreement on such balance; (ii) to the balance due for state
tax charges; (iii) to the balance due or the instalment amount for a
payment agreement for Intangible Transition Charges; (iv) to the balance
due or the instalment amount for a payment agreement for Competitive
Transition Charges; (v) to the balance due or the instalment amount for a
payment agreement for fixed and variable utility distribution service
charges; (vi) to the current state tax charges; (vii) to the current
Intangible Transition Charges; and (viii) to the current Competitive
Transition Charges; (ix) to the current fixed and variable utility
distribution service charges; (x) to the balance due for prior charges for
energy and capacity (if PECO Energy is the provider of last resort); (xi)
to the current charges for energy and capacity charges (if PECO Energy is
the provider of last resort); and (xii) to the non-basic service charges.
(c) Any ITC Collections received by the Servicer during any
Collection Period shall be allocated between the
20
Issuers based on their respective Percentages with respect to the
Collection Period during which such ITC Collections were expected to be
collected.
SECTION 3.03. Servicing and Maintenance Standards. The Servicer shall, on
behalf of each Issuer, (a) manage, service, administer and make collections in
respect of the Serviced Intangible Transition Property with reasonable care and
in material compliance with applicable law, including all applicable PUC
Regulations and guidelines, using the same degree of care and diligence that the
Servicer exercises with respect to billing and collection activities that the
Servicer conducts for itself and others; (b) follow standards, policies and
procedures in performing its duties as Servicer that are customary in the
Servicer's industry; (c) use all reasonable efforts, consistent with its
customary servicing procedures, to enforce and maintain rights in respect of the
Intangible Transition Property; and (d) calculate Intangible Transition Charges
in compliance with the Statute, the Qualified Rate Order and any applicable
tariffs, except where the failure to comply with any of the foregoing would not
adversely affect any Issuer's or any Bond Trustee's interest in the Serviced
Intangible Transition Property. The Servicer shall follow such customary and
usual practices and procedures as it shall deem necessary or advisable in its
servicing of all
21
or any portion of the Serviced Intangible Transition Property, which, in
the Servicer's judgment, may include the taking of legal action pursuant to
Section 3.09 hereof or otherwise.
SECTION 3.04. Servicer's Certificates. (a) The Servicer will provide to
each Issuer, the Bond Trustee under the Indenture to which such Issuer is a
party, and each of the Rating Agencies the statements and certificates specified
in the Issuer Annex for such Issuer.
SECTION 3.05. Annual Statement as to Compliance; Notice of Default. (a) The
Servicer shall deliver to each Issuer, each Bond Trustee and each Rating Agency,
on or before March 31 of each year beginning March 31, 1999, an Officers'
Certificate, stating that (i) a review of the activities of the Servicer during
the preceding calendar year (or relevant portion thereof) and of its performance
under this Agreement has been made under such officers' supervision and (ii) to
the best of such officers' knowledge, based on such review, the Servicer has
fulfilled all its obligations under this Agreement throughout such period or, if
there has been a default in the fulfillment of any such obligation, describing
each such default.
(b) The Servicer shall deliver to each Issuer, each Bond Trustee and each
Rating Agency, promptly after having obtained knowledge thereof, but in no event
later
22
than five Business Days thereafter, written notice in an Officers'
Certificate of any event which with the giving of notice or lapse of time, or
both, would become a Servicer Default under Section 6.01.
SECTION 3.06. 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 each Issuer, each Bond Trustee and
each Rating Agency, on or before March 31 of each year, beginning March 31, 2000
to and including the March 31 succeeding the retirement of all Transition Bonds,
a report addressed to the Servicer (the "Annual Accountant's Report"), which may
be included as part of the Servicer's customary auditing activities, to the
effect that such firm has performed certain procedures in connection with the
Servicer's compliance with its obligations under this Agreement during the
preceding calendar year ended December 31 (or, in the case of the first Annual
Accountant's Report, the period of time from the first Transfer Date until
December 31, 1999), identifying the results of such procedures and including any
exceptions noted. In the event such accounting firm requires any Bond Trustee or
any Issuer to agree or consent to the procedures performed by such firm, such
Issuer shall direct the
23
applicable Bond Trustee in writing to so agree; it being understood and
agreed that such Bond Trustee will deliver such letter of agreement or consent
in conclusive reliance upon the direction of such Issuer, and neither such Bond
Trustee nor such Issuer will 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 3.07. Intangible Transition Property Documentation. To assure
uniform quality in servicing the Serviced Intangible Transition Property and to
reduce administrative costs, the Servicer shall keep on file, in accordance with
its customary procedures, all documents relating to the Intangible Transition
Property, including copies of the Qualified Rate Order and all documents filed
with the PUC in connection with any Intangible Transition Charges Adjustment
(collectively, the "Intangible Transition Property Documentation").
SECTION 3.08. Computer Records; Audits of Documentation. (a) Safekeeping.
The Servicer shall
24
maintain accurate and complete accounts, records and computer systems
pertaining to the Intangible Transition Property and the Intangible Transition
Property Documentation in accordance with its standard accounting procedures and
in sufficient detail to permit reconciliation between payments or recoveries on
(or with respect to) Intangible Transition Charges and the ITC Collections from
time to time remitted to each Bond Trustee pursuant to Section 5.10 and to
enable each Issuer to comply with this Agreement and the Indenture to which it
is a party. The Servicer shall conduct, or cause to be conducted, periodic
audits of the Intangible Transition Property Documentation held by it under this
Agreement and of the related accounts, records and computer systems, in such a
manner as shall enable each Issuer and each Bond Trustee, as pledgee of the
applicable Issuer, to verify the accuracy of the Servicer's record keeping. The
Servicer shall promptly report to each Issuer and each Bond Trustee any failure
on the Servicer's part to hold the Intangible Transition Property Documentation
and maintain its accounts, records and computer systems as herein provided and
promptly take appropriate action to remedy any such failure. Nothing herein
shall be deemed to require an initial review or any periodic review by any
Issuer or any Bond Trustee of the Intangible Transition Property Documentation.
25
(b) Maintenance of and Access to Records. The Servicer shall maintain the
Intangible Transition Property Documentation at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ or at such other office as shall be specified to each
Issuer and each Bond Trustee by written notice not later than 30 days prior to
any change in location. The Servicer shall permit each Issuer and each Bond
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 Intangible
Transition Property and Intangible Transition Charges and the Intangible
Transition Property Documentation. The failure of the Servicer to provide access
to such information as a result of an obligation or applicable law (including
PUC Regulations) prohibiting disclosure of information regarding customers shall
not constitute a breach of this Section 3.08(b).
SECTION 3.09. Defending Intangible Transition Property Against Claims. The
Servicer shall institute any action or proceeding necessary to compel
performance by the PUC or the Commonwealth of Pennsylvania of any of their
obligations or duties under the Statute or the Qualified Rate Order with respect
to the Intangible Transition Property. The costs of any such action reasonably
allocated
26
by the Servicer to the Serviced Intangible Transition Property, based on
the ratio the Serviced Intangible Transition Property bears to the total
Intangible Transition Property, shall be payable from ITC Collections as an
Operating Expense in accordance with the Indentures and shall be allocated among
the Issuers based on the ratio the outstanding principal amount of Transition
Bonds issued by each such Issuer bears to the aggregate outstanding principal
amount of Transition Bonds issued by all the Issuers at the time such costs are
incurred. The Servicer's obligations pursuant to this Section 3.09 shall survive
and continue notwithstanding the fact that the payment of Operating Expenses
pursuant to the Indentures may be delayed (it being understood that the Servicer
may be required to advance its own funds to satisfy its obligations hereunder).
SECTION 3.10. Opinions of Counsel. The Servicer shall deliver to each
Issuer and each Bond Trustee:
(a) promptly after the execution and delivery of this Agreement and
of each amendment hereto, promptly after the execution of each Sale
Agreement and of each amendment thereto and on each Transfer Date, an
Opinion of Counsel either (i) to the effect that, in the opinion of such
counsel, all filings, including filings with the PUC pursuant to the
Statute, that are necessary to fully preserve and protect the interests
27
of each Bond Trustee in the Serviced Intangible Transition Property
have been executed and filed, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or
(ii) to the effect that, in the opinion of such counsel, no such action
shall be necessary to preserve and protect such interest; and
(b) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months
after the first Transfer Date, an Opinion of Counsel, dated as of a date
during such 90-day period, either (i) to the effect that, in the opinion
of such counsel, all filings with the PUC pursuant to the Statute, have
been executed and filed that are necessary to preserve fully and protect
fully the interest of each Bond Trustee in the Serviced Intangible
Transition Property, and reciting the details of such filings or referring
to prior Opinions of Counsel in which such details are given, or (ii) to
the effect that, in the opinion of such counsel, no such action shall be
necessary to preserve and protect such interest.
Each Opinion of Counsel referred to in clause (a) or (b) above shall
specify any action necessary (as of the
28
date of such opinion) to be taken in the following year to preserve and
protect such interest.
ARTICLE IV
Services Related to Intangible
Transition Charges Adjustments
SECTION 4.01. Intangible Transition Charges Adjustments. The Servicer shall
perform the calculations and take the actions relating to revising the
Intangible Transition Charges, in each case set forth in each Issuer Annex to
this Agreement.
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 Issuers have relied and will rely in acquiring Serviced Intangible
Transition Property. The representations and warranties shall survive the sale
of any of the Serviced Intangible Transition Property to any Issuer and the
pledge thereof to any Bond Trustee pursuant to any 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
29
currently owned and such business is presently conducted, and has
the power, authority and legal right to service the Serviced Intangible
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 Serviced Intangible Transition Property as required by this
Agreement) requires such qualifications, licenses or approvals (except
where the failure to so qualify would not be reasonably likely to have a
material adverse effect on the Servicer's business, operations, assets,
revenues, properties or prospects or adversely affect the servicing of the
Serviced Intangible Transition Property).
(c) Power and Authority. The Servicer has the corporate power and
authority to execute and deliver this Agreement and to carry out its
terms; and the execution, delivery and performance of this Agreement have
been duly authorized by the Servicer by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid
and binding obligation of the
30
Servicer enforceable against the Servicer in accordance with its
terms subject to bankruptcy, receivership, insolvency, fraudulent
transfer, reorganization, moratorium or other laws affecting creditors'
rights generally from time to time in effect and to general principles of
equity (regardless of whether considered in a proceeding in equity or at
law).
(e) No Violation. The consummation of the transactions contemplated
by this Agreement and the fulfillment of the terms hereof shall not
conflict with, result in any breach of any of the terms and provisions of,
nor constitute (with or without notice or lapse of time) a default under,
the articles of incorporation or by-laws of the Servicer, or any
indenture, agreement or other instrument to which the Servicer is a party
or by which it shall be bound; nor result in the creation or imposition of
any Lien (other than the lien of the Mortgage on the Servicer's interest
in this Agreement) upon any of its properties pursuant to the terms of any
such indenture, agreement or other instrument; nor violate any law or any
order, rule or regulation applicable to the Servicer of any court or of
any Federal or state regulatory body, administrative agency or other
governmental
31
instrumentality having jurisdiction over the Servicer or its
properties.
(f) Approvals. Except for filings with the PUC for revised
Intangible Transition Charges pursuant to Section 4.01 and the Issuer
Annexes and UCC continuation filings, no approval, authorization, consent,
order or other action of, or filing with, any court, Federal or state
regulatory body, administrative agency or other governmental
instrumentality is required in connection with the execution and delivery
by the Servicer of this Agreement, the performance by the Servicer of the
transactions contemplated hereby or the fulfillment by the Servicer of the
terms hereof, except those that have been obtained or made.
(g) 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) except as disclosed by the Servicer to the Issuers,
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 Agreement or (ii)
relating to the
32
Servicer and which might adversely affect the Federal or state
income tax attributes of the Transition Bonds.
(h) Reports and Certificates. Each report and certificate delivered in
connection with any filing made to the PUC by the Servicer on behalf of any
Issuer with respect to Intangible Transition Charges or Intangible
Transition Charges 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, the
representation and warranty of the Servicer with respect thereto will be
limited to the representation and warranty that such assumptions, forecasts
or other predictions of future events are reasonable based upon historical
performance.
SECTION 5.02. Indemnities of Servicer; Release of Claims. (a) The Servicer
shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Servicer under this Agreement.
(b) The Servicer shall indemnify each Issuer and each Bond Trustee, for
itself and on behalf of the Transition Bondholders for which it acts as Bond
Trustee,
33
and each of their respective trustees, officers, directors and agents for,
and defend and hold harmless each such Person from and against, any and all
Losses that may be imposed upon, incurred by or asserted against any such Person
as a result of (i) the Servicer's wilful misfeasance, bad faith or gross
negligence in the performance of its duties or observance of its covenants under
this Agreement or the Servicer's reckless disregard of its obligations and
duties under this Agreement or (ii) the Servicer's breach of any of its
representations or warranties in this Agreement.
(c) If any action, claim, demand or proceeding (including any governmental
investigation) shall be brought or asserted against a party (the "indemnified
party") entitled to any indemnification provided for under this Section 5.02,
such indemnified party shall promptly notify the Servicer in writing; provided,
however, that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent the Servicer shall have
been actually prejudiced as a result of such failure.
(d) The Servicer shall indemnify the Bond Trustees and their respective
officers, directors and agents for, and defend and hold harmless each such
Person from and against, any and all Losses that may be imposed upon, incurred
by or asserted against any such Person as a result of the acceptance or
performance of the trusts and duties
34
contained herein and in the Indenture, except to the extent that any such
Loss shall be due to the wilful misfeasance, bad faith or gross negligence of
the applicable Bond Trustee. Such amounts with respect to the Bond Trustee of
the First Issuer shall be deposited and distributed in accordance with the
Indenture to which such Bond Trustee is a party.
(e) The Servicer's indemnification obligations under Section 5.02(b) and
(d) for events occurring prior to the removal or resignation of any Bond Trustee
or the termination of this Agreement with respect to any Issuer shall survive
the resignation or removal of such Bond Trustee or the termination of this
Agreement with respect to such Issuer and shall include reasonable costs, fees
and expenses of investigation and litigation (including any Issuer's and any
Bond Trustee's reasonable attorneys' fees and expenses).
(f) Except to the extent expressly provided for in this Agreement, the Sale
Agreements or the Formation Documents (including the Servicer's claims with
respect to the Monthly Servicing Fees and the Seller's claim for payment of the
purchase price of Intangible Transition Property), the Servicer hereby releases
and discharges each Issuer (including its respective trustees, officers,
directors and agents, if any), and each Bond Trustee
35
(including its respective officers, directors and agents) (collectively,
the "Released Parties") from any and all actions, claims and demands whatsoever,
which the Servicer, in its capacity as Servicer or Seller, shall or may have
against any such Person relating to the Serviced Intangible Transition Property
or the Servicer's activities with respect thereto other than any actions, claims
and demands arising out of the wilful 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 (a) into which the Servicer may be merged or
consolidated and which succeeds to the major 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 the major 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 the
major part of the electric distribution business of the Servicer, (d) which may
succeed to the properties and assets of the Servicer substantially as a whole
and which succeeds to the major part of the electric distribution business of
the Servicer or (e) which may otherwise succeed to the major part of the
electric distribution business of the Servicer, which Person
36
in any of the foregoing cases executes an agreement of assumption to
perform every obligation of the Servicer hereunder, shall be the successor to
the Servicer under this Agreement without further act on the part of any of the
parties to this Agreement; provided, however, that (i) immediately after giving
effect to such transaction, no representation and warranty made pursuant to
Section 5.01 shall have been breached and no Servicer Default, and no event
which, after notice or lapse of time, or both, would become a Servicer Default,
shall have occurred and be continuing, (ii) the Servicer shall have delivered to
each Issuer and each Bond Trustee an Officers' Certificate and an Opinion of
Counsel each stating that such consolidation, merger or succession and such
agreement of assumption comply with this Section 5.03 and that all conditions
precedent provided for in this Agreement relating to such transaction have been
complied with, (iii) the Rating Agencies shall have received prior written
notice of such transaction, (iv) the Servicer shall have delivered to each
Issuer, each Bond Trustee and each Rating Agency an Opinion of Counsel either
(A) stating that, in the opinion of such counsel, all filings, including filings
with the PUC pursuant to the Statute, have been executed and filed that are
necessary to preserve fully and protect fully the interests of each Issuer in
the Serviced Intangible Transition Property and
37
reciting the details of such filings or (B) stating that, in the opinion of
such counsel, no such action shall be necessary to preserve and protect such
interests. Notwithstanding anything herein to the contrary, the execution of the
above referenced agreement of assumption and compliance with clauses (i), (ii),
(iii) and (iv) above shall be conditions precedent to the consummation of the
transactions referred to in clause (a), (b), (c), (d) or (e) above.
SECTION 5.04. Assignment of Servicer's Obligations. Pursuant to paragraph
13 of the Qualified Rate Order in which the PUC authorizes PECO Energy to
contract with an alternative party to perform PECO Energy's obligations
contemplated in the Qualified Rate Order, the Servicer may assign its
obligations hereunder to any electric distribution company (as such term is
defined in the Statute) which succeeds to the major part of PECO Energy's
electric distribution business. Prior to any such assignment, the Servicer shall
provide written notice thereof to each of the Rating Agencies.
SECTION 5.05. Limitation on Liability of Servicer and Others. The Servicer
shall not be liable to any Issuer, except as provided under this Agreement, for
any action taken or for refraining from the taking of any action pursuant to
this Agreement or for errors in judgment;
38
provided, however, that this provision shall not protect the Servicer
against any liability that would otherwise be imposed by reason of wilful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of obligations and duties under this Agreement.
The Servicer and any director or officer or employee or agent of the Servicer
may rely in good faith on the advice of counsel reasonably acceptable to the
Bond Trustees or on any document of any kind, prima facie properly executed and
submitted by any Person, respecting any matters arising under this Agreement.
Except as provided in this Agreement, the Servicer shall not be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its duties to service the Serviced Intangible Transition Property
in accordance with this Agreement or related to its obligation to pay
indemnification, and that in its reasonable opinion may cause it to incur any
expense or liability.
SECTION 5.06. PECO Energy Not To Resign as Servicer. Subject to the
provisions of Sections 5.03 and 5.04, PECO Energy shall not resign from the
obligations and duties hereby imposed on it as Servicer under this Agreement
except upon a determination that the performance of its duties under this
Agreement shall no longer be permissible under applicable law. Notice of any
such determination
39
permitting the resignation of PECO Energy shall be communicated to each
Issuer, each Bond 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 each Issuer and
each Bond Trustee concurrently with or promptly after such notice. No such
resignation shall become effective until a successor Servicer shall have assumed
the servicing obligations and duties hereunder of PECO Energy in accordance with
Section 6.04.
SECTION 5.07. Monthly Servicing Fee. Each Issuer, severally and not
jointly, agrees to pay the Servicer, solely to the extent amounts are available
therefor in accordance with the Indenture to which such Issuer is a party, the
Monthly Servicing Fees with respect to all Series of Transition Bonds issued by
such Issuer. The Monthly Servicing Fee with respect to a Series for a Monthly
Allocation Date shall equal the product of (a) 1/12, (b) the Servicing Fee Rate
for such Series and (c) the outstanding principal amount of the Transition Bonds
of such Series as of such Monthly Allocation Date. The Servicer will be entitled
to retain as additional compensation net investment income on ITC Collections
related to Serviced
40
Intangible Transition Property received by the Servicer prior to each
Remittance Date and the late fees, if any, paid by Customers to the Servicer.
The foregoing fees constitute a fair and reasonable price for the obligations to
be performed by the Servicer.
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 Transition Bondholders.
SECTION 5.09. Appointments. The Servicer may at any time appoint a
subservicer to perform all or any portion of its obligations as Servicer
hereunder; provided, however, that the Rating Agency Condition shall have been
satisfied in connection therewith with respect to all Rating Agencies other than
Moody's (and the Servicer shall have furnished Moody's with written notice of
such appointment prior to its effectiveness); provided further that the Servicer
shall remain obligated and be liable to each Issuer for the servicing and
administering of the Serviced Intangible 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
41
same extent and under the same terms and conditions as if the Servicer
alone were servicing and administering the Serviced Intangible Transition
Property. The fees and expenses of the subservicer shall be as agreed between
the Servicer and its subservicer from time to time, and no Issuer (or trustee
thereof, if any), Bond Trustee or Transition Bondholder shall have any
responsibility therefor.
SECTION 5.10. Remittances. (a) Subject to Section 5.07, the Servicer shall
remit all ITC Collections (from whatever source) allocated to each Issuer
pursuant to Section 3.02 and all proceeds of other Collateral of such Issuer, if
any, received by the Servicer to the Bond Trustee under the Indenture to which
such Issuer is a party, for deposit pursuant to such Indenture, not later than
the second Business Day after receipt thereof
(b) Notwithstanding the foregoing clause (a), (i) as long as PECO Energy or
any successor to PECO Energy's electric distribution business remains the
Servicer, (ii) no Servicer Default has occurred and is continuing and (iii) (A)
PECO Energy or such successor maintains a short-term rating of "A-1" or better
by Standard & Poor's, "P-1" or better by Moody's and, if rated by Fitch IBCA,
"F-2" by Fitch IBCA (and for five Business Days following a reduction in any
such rating) or (B) the Rating Agency Condition shall
42
have been satisfied (and any conditions or limitations imposed by the Rating
Agencies in connection therewith are complied with), the Servicer need not make
the daily remittances required by such clause (a), but in lieu thereof, shall
remit all ITC Collections (from whatever source) allocated to each Issuer
pursuant to Section 3.02 and all proceeds of other Collateral of such Issuer, if
any, received by the Servicer during each Collection Period and any such amounts
received in prior Collection Periods but not so remitted to the Bond Trustee
under the Indenture to which such Issuer is a party, for deposit pursuant to
such Indenture, not later than the final day of such Collection Period or, if
any such day is not a Business Day, the next succeeding Business Day.
SECTION 5.11. Servicer Advances. The Servicer shall make advances of
interest or principal on the Transition Bonds of any Series in the manner and to
the extent, if any, specified in any Annex to this Agreement entered into in
connection with the issuance of such Transition Bonds.
SECTION 5.12. Protection of Title. The Servicer shall execute and file
such filings, including filings with the PUC pursuant to the Statute, 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,
43
maintain, and protect the interests of each Issuer in its respective
Serviced Intangible Transition Property, including all filings required under
the Statute relating to the transfer of the ownership or security interest in
the Serviced Intangible Transition Property by the Seller to such Issuer or any
security interest granted by such Issuer in its Serviced Intangible Transition
Property. The Servicer shall deliver (or cause to be delivered) to the
applicable Issuers file-stamped copies of, or filing receipts for, any document
filed as provided above, as soon as available following such filing.
ARTICLE VI
Servicer Default
SECTION 6.01. Servicer Default. If any one of the following events (a
"Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to remit to any Bond Trustee on
behalf of an Issuer any required remittance that shall continue unremedied
for a period of three Business Days after written notice of such failure
is received by the Servicer from such Issuer or Bond Trustee; or
(b) any failure by the Servicer or, so long as the Seller and the
Servicer are the same Person, the Seller, as applicable, duly to observe
or perform in
44
any material respect any other covenant or agreement of the Servicer or
the Seller, as the case may be, set forth in this Agreement or any
other Basic Document to which it is a party, which failure shall (i)
materially and adversely affect the Intangible Transition Property and
(ii) continue unremedied for a period of 30 days after written notice
of such failure shall have been given to the Servicer or the Seller, as
the case may be, by any Issuer or any Bond Trustee or after discovery
of such failure by an officer of the Servicer or the Seller, as the
case may be; or
(c) any representation or warranty made by the Servicer in this
Agreement shall prove to have been incorrect when made, which has a
material adverse effect on any of the Issuers or the Transition
Bondholders and which material adverse effect continues unremedied for a
period of 60 days after the date on which written notice thereof shall
have been given to the Servicer by any Issuer or any Bond Trustee; 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, Bond Trustees, as assignees of the applicable Issuers, with
respect to Holders of a majority of the outstanding principal amount of the
45
Transition Bonds, 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 6.02 to continue performing its functions as Servicer
until a successor Servicer is appointed) of the Servicer under this Agreement
with respect to all the Issuers. In addition, upon a Servicer Default described
in Section 6.01(a), each of the following shall be entitled to apply to the PUC
for sequestration and payment of revenues arising with respect to the Serviced
Intangible Transition Property: (i) each Issuer or its assignees or (ii)
pledgees or transferees, including transferees under the Statute, of the
Serviced Intangible Transition Property. On or after the receipt by the Servicer
of a Termination Notice, all authority and power of the Servicer under this
Agreement with respect to the Issuers, whether with respect to the Serviced
Intangible Transition Property, the related Intangible Transition Charges or
otherwise, shall, upon appointment of a successor Servicer pursuant to Section
6.02, without further action, pass to and be vested in such successor Servicer
and, without limitation, each Bond 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
46
other instruments, and to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such Termination Notice,
whether to complete the transfer of the Intangible Transition Property
Documentation and related documents, or otherwise. The predecessor Servicer
shall cooperate with the successor Servicer, the Bond Trustees and the Issuers
in effecting the termination of the responsibilities and rights of the
predecessor Servicer under this Agreement, including the transfer to the
successor Servicer for administration by it of all 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 Serviced Intangible Transition Property or
the related Intangible Transition Charges. As soon as practicable after receipt
by the Servicer of such Termination Notice, the Servicer shall deliver the
Intangible Transition Property Documentation to the successor Servicer. All
reasonable costs and expenses (including attorneys fees and expenses) incurred
in connection with transferring the Intangible Transition Property Documentation
to the successor Servicer and amending this Agreement to reflect such succession
as Servicer pursuant to this Section shall be paid by the predecessor Servicer
upon presentation of reasonable documentation of such costs and expenses.
Termination of
47
PECO Energy as Servicer shall not terminate PECO Energy's rights or
obligations as Seller under any of the Sale Agreements.
SECTION 6.02. Notice of Servicer Default. The Servicer shall deliver to
each Issuer, each Bond 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 (such as a breach of any representation or warranty made by the
Servicer in this Agreement) which, with the giving of notice or the passage of
time, would become a Servicer Default under Section 6.01.
SECTION 6.03. Waiver of Past Defaults. All the Bond Trustees acting
together 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 any Bond Trustee of ITC Collections from Serviced
Intangible Transition Property in accordance with Section 5.10 of this
Agreement. Upon any such waiver of a past default, such default shall cease to
exist, and any Servicer Default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereto.
48
SECTION 6.04. Appointment of Successor. (a) Upon the Servicer's receipt of
a Termination Notice, pursuant to Section 6.01 or the Servicer's resignation in
accordance with the terms of this Agreement, the predecessor Servicer shall
continue to perform its functions as Servicer under this Agreement and shall be
entitled to receive the requisite portion of the Monthly Servicing Fees, until a
successor Servicer shall have assumed in writing the obligations of the Servicer
hereunder as described below. In the event of the Servicer's termination
hereunder, Bond Trustees, as assignees of the applicable Issuers, with respect
to Holders of a majority of the outstanding principal amount of the Transition
Bonds, shall appoint a successor Servicer, and the successor Servicer shall
accept its appointment by a written assumption in form acceptable to the Issuers
and the Bond Trustees. If, within 30 days after the delivery of the Termination
Notice, a new Servicer shall not have been appointed and accepted such
appointment, any Bond Trustee may petition the PUC or a court of competent
jurisdiction to appoint a successor Servicer under this Agreement. A Person
shall qualify as a successor Servicer only if (i) such Person is permitted under
PUC Regulations to perform the duties of the Servicer pursuant to the Statute,
the Qualified Rate Order and this Agreement, (ii) the Rating Agency Condition
shall have been satisfied
49
with respect to all Rating Agencies other than Moody's (and Moody's shall
have been furnished with written notice of such appointment prior to its
effectiveness) and (iii) such Person enters into a servicing agreement with the
Issuers having substantially the same provisions as this Agreement.
(b) Upon appointment, the successor Servicer shall be the successor in all
respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties and liabilities arising thereafter relating thereto
placed on the predecessor Servicer and shall be entitled to the Monthly
Servicing Fees and all the rights granted to the predecessor Servicer by the
terms and provisions of this Agreement.
(c) The successor Servicer may not resign unless it is prohibited from
serving as such by law.
SECTION 6.05. Cooperation with Successor. The Servicer covenants and agrees
with each Issuer that it will, on an ongoing basis, cooperate with the successor
Servicer and provide whatever information is, and take whatever actions are,
reasonably necessary to assist the successor Servicer in performing its
obligations hereunder.
ARTICLE VII
Miscellaneous Provisions
SECTION 7.01. Amendment. This Agreement may be amended by the Seller, the
Servicer and the Issuers, with
50
the consent of all the Bond Trustees and, with respect to any amendment
which would materially adversely affect the rights of any Counterparty under any
Swap Agreement, the consent of each such Counterparty (which consent shall not
be unreasonably withheld). The Issuers shall furnish to each of the Rating
Agencies (i) prior to the execution of any such amendment or consent, written
notification of the substance thereof and (ii) promptly after the execution of
any such amendment or consent, a copy thereof.
Prior to the execution of any amendment to this Agreement, the Issuers and
the Bond Trustees shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement and the Opinion of Counsel referred to in Section 3.10. The
Issuers and the Bond Trustees may, but shall not be obligated to, enter into any
such amendment which affects their own rights, duties or immunities under this
Agreement or otherwise.
SECTION 7.02. Notices. All demands, notices and communications upon or to
the Servicer, the Issuers, the Bond Trustees or the Rating Agencies under this
Agreement shall be in writing, delivered personally, via facsimile, reputable
overnight courier or by first class mail, postage prepaid, and shall be deemed
to have been duly given upon receipt (a) in the case of the Servicer, to PECO
Energy
51
Company, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention of Vice
President, Finance and Treasurer, (b) in the case of any Issuer or any Bond
Trustee, at the address provided for notices or communications to such Person in
the Indenture to which such Person is a party, (c) in the case of Moody's, to
▇▇▇▇▇'▇ Investors Service, Inc., ABS Monitoring Department, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, (d) in the case of Standard & Poor's, to Standard &
Poor's Corporation, ▇▇ ▇▇▇▇▇▇▇▇ (▇▇▇▇ ▇▇▇▇▇), ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention of Asset Backed Surveillance Department, (e) in the case of Fitch
IBCA, to Fitch IBCA, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention of ABS Surveillance, and (f) in the case of Duff, to Duff & ▇▇▇▇▇▇
Credit Rating Company, ▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ (▇▇▇▇ ▇▇▇▇▇), ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇; or, as to each of the foregoing, at such other address as shall be
designated by written notice to the other parties.
SECTION 7.03. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 5.03 and 5.04 and as provided
in the provisions of this Agreement concerning the resignation of the Servicer,
this Agreement may not be assigned by the Servicer.
SECTION 7.04. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit
52
of the Servicer, the Issuers (including their respective trustees, if any)
and the Bond Trustees, on behalf of themselves and the Transition Bondholders,
and nothing in this Agreement, whether express or implied, shall be construed to
give to any other Person any legal or equitable right, remedy or claim in any
Collateral or under or in respect of this Agreement or any covenants, conditions
or provisions contained herein.
SECTION 7.05. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 7.06. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 7.07. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
53
SECTION 7.08. Governing Law. This Agreement shall be construed in
accordance with the laws of the Commonwealth of Pennsylvania, without reference
to its conflict of law provisions, and the obligations, rights and remedies of
the parties hereunder shall be determined in accordance with such laws.
SECTION 7.09. Assignment to Bond Trustee. The Servicer hereby acknowledges
and consents to any mortgage, pledge, assignment and grant of a security
interest by any Issuer to any Bond Trustee pursuant to any Indenture for the
benefit of any Transition Bondholders of all right, title and interest of such
Issuer in, to and under the Serviced Intangible Transition Property owned by
such Issuer and the proceeds thereof and the assignment of any or all of such
Issuer's rights hereunder to such Bond Trustee. In no event shall any Bond
Trustee have any liability for the representations, warranties, covenants,
agreements or other obligations of any 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 applicable Issuer.
SECTION 7.10. Nonpetition Covenants. Notwithstanding any prior termination
of this Agreement or the Indenture, but subject to the PUC's rights to order the
sequestration and payment of revenues arising with respect
54
to the Serviced Intangible Transition Property notwithstanding any
bankruptcy, reorganization or other insolvency proceedings with respect to the
debtor, pledgor or transferor of the Serviced Intangible Transition Property
pursuant to Section 2812(d)(3)(v) of the Statute, the Servicer shall not, prior
to the date which is one year and one day after the termination of the
applicable Indenture, petition or otherwise invoke or cause any Issuer to invoke
the process of any court or government authority for the purpose of commencing
or sustaining a case against any 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 any Issuer or any
substantial part of the property of any Issuer, or ordering the winding up or
liquidation of the affairs of any Issuer.
SECTION 7.11. Addition of Issuers. Upon execution and delivery by the
Servicer and a Person which owns Intangible Transition Property sold to such
Person by the Seller of an instrument in the form of Exhibit B hereto, such
Person shall become an Issuer hereunder with the same force and effect as if
originally named as an Issuer herein. The execution and delivery of any such
instrument shall not require the consent of any Issuer hereunder. The rights and
obligations of each Issuer hereunder shall remain in full
55
force and effect notwithstanding the addition of any new Issuer as a party to
this Agreement.
SECTION 7.12. Termination by Issuers. This Agreement shall terminate with
respect to any Issuer when all Transition Bonds issued by such Issuer have been
retired, redeemed or defeased in full.
SECTION 7.13. Limitation of Liability of Trustee. Notwithstanding anything
contained herein to the contrary, this Agreement has been countersigned by First
Union Trust Company, National Association, not in its individual capacity but
solely in its capacity as trustee of the First Issuer and in no event shall
First Union Trust Company, National Association, in its individual capacity have
any liability for warranties, covenants, agreements or other obligations of the
First 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 First Issuer. For all purposes of this Agreement, in the
performance of its duties or obligations hereunder or in the performance of any
duties or obligations of the First Issuer hereunder, First Union Trust Company,
National Association, shall be subject to, and entitled to
56
the benefits of, the applicable terms and provisions of the Formation
Documents relating to the First Issuer.
57
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
PECO ENERGY TRANSITION TRUST,
By: First Union Trust Company, National
Association, not in its individual
capacity but solely as Issuer Trustee
on behalf of PECO Energy
Transition Trust,
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
---------------------------------------
Title: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Vice President
PECO ENERGY COMPANY, Servicer,
By: /s/ J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------------
Title: J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Acknowledged and Accepted:
THE BANK OF NEW YORK, not in its
individual capacity but solely as
Bond Trustee on behalf of the
Holders of Transition Bonds
issued by the First Issuer,
By: /s/ ▇▇▇▇▇▇ ▇. Laser
-----------------------------
Title: ▇▇▇▇▇▇ ▇. Laser
Assistant Vice President
EXHIBIT A
to
MASTER SERVICING AGREEMENT
The Servicer agrees to comply with the following servicing procedures:
SECTION 1. Definitions.
(a) Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Master Servicing Agreement dated as of March 25, 1999,
between the First Issuer, the other Issuers from time to time party thereto and
PECO Energy Company, as Servicer (the "Servicing Agreement").
(b) Whenever used in this Exhibit A, the following words and phrases shall
have the following meanings:
"Adjustment Request" has, with respect to the First Issuer, the meaning
given to such term in the Issuer Annex relating to the First Issuer, or with
respect to any other Issuer, the meaning given to such term in the Issuer Annex
relating thereto.
"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 Intangible Transition Charges" means the amounts billed to
Customers pursuant to the Intangible Transition Charges, 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 PECO
Energy Company.
"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 an Third Party pursuant to which such Third Party will be
responsible
2
for billing and collecting all charges to Customers electing such billing
option, including the Intangible Transition Charges, and will become obligated
to the Servicer for such Billed Intangible Transition Charges, all in accordance
with applicable PUC Regulations and orders.
"Full Consolidated Third Party Billing" means the billing option available
to Customers served by a Third Party, if such option is approved by the utility
with respect to such Third Party, pursuant to which such Third Party performs
the same tasks it would perform under Consolidated Third Party Billing,
including billing Customers the itemized charges supplied by the Servicer to
such Third Party.
"Intangible Transition Charge Effective Date" means the date on which the
initial Intangible Transition Charges go into effect pursuant to the QRO.
"Intangible Transition Charge Termination Date" means the date on which the
Intangible Transition Charges will cease to be billed pursuant to the terms of
the QRO.
"Level Pay Plan" means a level payment plan offered by the Seller, which,
if elected by a Customer, provides for level monthly ▇▇▇▇ charges to such
Customer by estimating the amount that the Customer would pay during a year
(based on the Customer's actual usage during the prior year), then charging the
Customer 1/11th of that amount for each of eleven months, with quarterly
adjustments if necessary. In the twelfth month, the payments made by such
Customer during the preceding eleven months are reconciled with the amount owed
by such Customer for actual usage during the level pay period, and the Customer
is given a credit or billed for the difference as appropriate, based on such
reconciliation.
"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 the current Billing Period.
"Servicer Policies and Practices" means, with respect to the Servicer's
duties under this Exhibit A, with policies and practices of the Servicer
applicable to such duties that the Servicer follows with respect to comparable
assets that it services for itself.
3
"Variables" means the following variables for each Rate Class used in
calculating Adjustment Requests:
(i) the 30-day outstanding billed revenue;
(ii) the 60-day outstanding billed revenue;
(iii) the 90-day outstanding billed revenue (which may be solved for
in accordance with applicable Servicer Policies and Practices);
(iv) the 120-day outstanding billed revenue (which may be solved for
in accordance with applicable Servicer Policies and Practices);
(v) the 150-day outstanding billed revenue (which may be solved for in
accordance with applicable Servicer Policies and Practices);
(vi) the estimated Net Write-Off percentage; and
(vii) the projected billed revenue to which Intangible Transaction
Charges apply.
"Write-Offs" means write-offs of Billed Intangible Transition Charges that
remain unpaid by Customers or Third Parties as of 180 days after the issuance of
the Closing Bills containing such charges.
SECTION 2. Data Acquisition.
(a) Installation and Maintenance of Meters. Except to the extent that a
Third Party is responsible for such services pursuant to a Third Party Service
Agreement, 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
enable the Servicer to obtain usage measurements for each Customer every 27 to
33 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 PUC Regulations.
(c) Cost of Metering. No Issuer shall be obligated to pay any costs
associated with the metering duties set forth in this Section 2, including, but
not limited to, the costs of installing, replacing and maintaining meters, nor
shall any Issuer be entitled to any
4
credit against the Monthly 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 PUC Regulations) at least once each
calendar month and shall determine therefrom each Customer's individual
Intangible Transition Charge to be included on such Customer's ▇▇▇▇ pursuant to
PUC Regulations.
SECTION 4. Billing.
The Servicer shall implement the Intangible Transition Charges as of the
Intangible Transition Charge Effective Date and shall thereafter ▇▇▇▇ each
Customer or the Applicable Third Party for the respective Customer's outstanding
current and past due Intangible Transition Charges accruing through the
Intangible Transition Charge Termination Date, all in accordance with the
following:
(a) Frequency of Bills; Billing Practices. In accordance with the
Servicer's then-existing Servicer Policies and Practices for its own
charges, as such Servicer Policies and Practices may be modified from time
to time, the Servicer shall generate and issue a ▇▇▇▇ to each Customer, or,
in the case of a Customer who has elected Consolidated Third Party Billing,
to an Applicable Third Party, for such Customer's respective Intangible
Transition Charge as a general practice once every 27 to 33 days or such
other time period as allowed by the PUC, 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 case may be. In the event
that the Servicer makes any material modification to these practices, it
shall notify each Issuer, each Bond Trustee and the Rating Agencies as soon
as practicable, and in no event later than 60 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.
5
(b) Format.
(i) Each ▇▇▇▇ to a Customer shall contain the charge
corresponding to the respective Competitive Transition Charge owed by
such Customer for the Billing Period. Unless the Servicer's billing
system cannot do so, for billing cycles beginning [January 1], 1999,
the amount of the Competitive Transition Charge to be remitted to the
Issuers in respect of a Customer's Intangible Transition Charge shall
appear as a footnote to the Competitive Transaction Charge line-item
on each ▇▇▇▇.
(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 Competitive Transition Charge to be remitted by the
Servicer to the Issuers in respect of such Customer's Intangible
Transition Charge.
(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 PUC Regulations shall from time to time
prescribe. To the extent that ▇▇▇▇ format, structure and text are not
prescribed by the Statute, other applicable law or PUC 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 (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 PUC Regulations, or if not prescribed by
applicable PUC Regulations, by such means as are mutually agreed upon by the
Servicer and the Applicable Third Party and are consistent with PUC 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.
6
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
Intangible Transition 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 with respect to the following:
(A) The Servicer shall prepare and deliver overdue notices to
Customers and Third Parties in accordance with applicable PUC
Regulations and Servicer Policies and Practices.
(B) The Servicer shall apply late payment charges to outstanding
Customer and Third Party balances in accordance with applicable PUC
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 no Issuer shall have
any right to share in the same.
(C) The Servicer shall deliver verbal and written final call
notices in accordance with applicable PUC Regulations and Servicer
Policies and Practices.
(D) The Servicer shall adhere and carry out disconnection
policies in accordance with the Statute, other applicable law and PUC
Regulations and Servicer Policies and Practices.
(E) The Servicer may employ the assistance of collections agents
in accordance with applicable PUC Regulations and Servicer Policies
and Practices.
(F) The Servicer shall apply Customer and Third Party deposits to
the payment of delinquent accounts in accordance with applicable PUC
Regulations and Servicer Policies and Practices and according to the
priorities set forth in Section 6(b)(ii), (iii) and (iv) of this
Exhibit A.
7
(G) The Servicer shall promptly take all necessary action in
accordance with applicable PUC Regulation to terminate billing of
Competitive Transition Charges by Third Parties whose payments are 45
or more days delinquent and to collect the Billed Intangible
Transition Charges directly from the applicable Customers.
(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
Intangible Transition Charges, in accordance with its Servicer Policies and
Practices, that remain outstanding for 180 days.
(iii) The Servicer shall accept payment from Customers in respect of
Billed Intangible Transition Charges in such forms and methods and at such
times and places as it accepts for payment of its own charges. The Servicer
shall accept payment from Third Parties in respect of Billed Intangible
Transition 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 PUC 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 Servicer 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
8
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 the Seller 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 Level Pay Plan, the Servicer shall treat ITC
Collections received from such Customers as if such Customers had been
billed for their respective Intangible Transition Charges in the absence of
the Level Pay Plan. Partial payment of a Level Pay Plan payment shall be
allocated according to clause (iii) above, and overpayment of a Level Pay
Plan payment shall be allocated according to clause (iv) above.
(c) Accounts; Records.
(i) The Servicer shall maintain accounts and records as to the
Serviced Intangible 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 Serviced
Intangible Transition Property and the amounts from time to time remitted
to the Collection Account in respect of the Serviced Intangible Transition
Property.
(ii) The Servicer shall maintain accounts and records as to Third
Parties performing Consolidated Third Party Billing or Full Consolidated
Third Party Billing for 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 Serviced
Intangible Transition Property and amounts owed by such Customers in
respect of Intangible Transition Charges.
(d) Investment of ITC Collections Received.
Prior to remittance on the applicable Remittance Date, the Servicer may
invest ITC 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 ITC Collections received by the Servicer from or
on behalf of Customers during prior
9
Collection Periods in respect of all previously Billed Intangible
Transition Charges. With respect to accounts for which the City of
Philadelphia Board of Education is billed and accounts of Customers
that are municipalities billed in Rate Class TL, ITC Collection will
be estimated based upon the amounts billed using the assumption that
all billed amounts are paid when due. These estimates shall be
reconciled to actual ITC Collections received from these accounts
twice yearly on May 15 and November 15 of each year, with any
under-remittance or over-remittance corrected on the immediately
following Remittance Date.
(ii) In accordance with Section 4.01 of the Servicing Agreement and
each Issuer Annex, the Servicer shall update the Variables and shall
prepare Adjustment Requests to reflect the updated Variables when required
to do so pursuant to each Issuer Annex.
(f) Remittances.
(i) The Servicer shall make remittances to the Issuers in accordance
with Section 5.10 of the Servicing Agreement.
(ii) In the event of any change of account or change of institution
affecting the remittances, the affected Issuers 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.
1
EXHIBIT B
Supplement for Addition of Issuer
SUPPLEMENT NO. __ dated as of [ ], to the Master Servicing Agreement dated
as of [ ], 1999, between [ ], a [state of formation] [type of entity] (the "New
Issuer") and PECO ENERGY COMPANY, a Pennsylvania corporation as Servicer (the
"Servicer").
A. Reference is made to the Master Servicing Agreement dated as of [ ],
1999 (as amended, supplemented or otherwise modified from time to time, the
"Servicing Agreement"), between PECO ENERGY TRANSITION TRUST, a Delaware
business trust (the "First Issuer"), the other Issuers from time to time party
thereto (together with the First Issuer, the "Issuers") and the Servicer.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Servicing Agreement.
C. The Issuers have entered into the Servicing Agreement in order to
provide for servicing of the Serviced Intangible Transition Property. Section
7.11 of Servicing Agreement provides that additional Persons may become Issuers
under the Servicing Agreement by execution and delivery of an instrument in the
form of this Supplement. The New Issuer is executing this Supplement in
accordance
2
with the requirements of the Servicing Agreement to become an Issuer under
the Servicing Agreement in order to provide for the servicing of the Serviced
Intangible Transition Property owned by the New Issuer.
Accordingly, the Servicer and the New Issuer agree as follows
SECTION 1. In accordance with Section 7.11 of the Servicing Agreement, the
New Issuer by its signature below becomes an Issuer under the Servicing
Agreement with the same force and effect as if originally named therein as an
Issuer and the New Issuer hereby agrees to all the terms and provisions of the
Servicing Agreement applicable to it as an Issuer thereunder. Each reference to
an "Issuer" in the Servicing Agreement shall be deemed to include the New
Issuer. The Servicing Agreement is hereby incorporated herein by reference.
SECTION 2. The New Issuer represents and warrants to the Servicer that this
Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms.
SECTION 3. This Supplement 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
3
agreement. This Supplement shall become effective when the Servicer shall
have received counterparts of this Supplement that, when taken together, bear
the signatures of the New Issuer and the Servicer.
SECTION 4. Except as expressly supplemented hereby, the Servicing Agreement
shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 6. Any provision of this Supplement that is prohibited or
unenforceable in any jurisdiction shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
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SECTION 7. All communications and notices here under shall be in writing
and given as provided in Section 7.02 of the Servicing Agreement.
IN WITNESS WHEREOF, the New Issuer and the Servicer have duly executed this
Supplement to the Servicing Agreement as of the day and year first above
written.
[Name Of New Issuer],
by
--------------------------------
Title:
PECO ENERGY COMPANY, Servicer,
by
--------------------------------
Title:
1
ANNEX 1
to
MASTER SERVICING AGREEMENT
The Servicer agrees to comply with the following with respect to PECO
Energy Transition Trust (the "First Issuer"):
SECTION 1. Definitions. (a) Capitalized terms used herein and not otherwise
defined shall have the meanings set forth in the Master Servicing Agreement
dated as of March 25, 1999 (the "Servicing Agreement"), between the First
Issuer, the other Issuers from time to time party thereto and PECO ENERGY
COMPANY, as Servicer.
(b) Whenever used in this Annex 1, the following words and phrases shall
have the following meanings:
"Adjustment Date" has the meaning specified in the Indenture.
"Adjustment Request" means an application filed by the Servicer with the
PUC for revised Intangible Transition Charges pursuant to Section 6(b) of this
Annex.
"Available Reserve Amount" means, as of any date, the amount on deposit in
the Reserve Subaccount less the product of (a) the Prepayment Amount and (b) the
difference, expressed as a percentage, between 100% and the Expected
Amortization Percentage for the immediately following Regulatory Year.
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"Bond Trustee" has the meaning specified in the Indenture.
"Calculation Date" means, with respect to any Series of Transition Bonds,
such date or dates specified as such in the Series Supplement therefor.
"Calculated Overcollateralization Level" has the meaning set forth in the
Indenture.
"Class" has the meaning specified in the Indenture.
"Expected Amortization Percentage" means, with respect to any Regulatory
Year, the percentage equivalent of a fraction, the numerator of which is the
aggregate amount of Transition Bonds of all Series to be amortized during such
Regulatory Year as set forth in Expected Amortization Schedules therefor and the
denominator of which is the Projected Transition Bond Balance on the first day
of such Regulatory Year.
"Expected Amortization Schedule" has the meaning set forth in the
Indenture.
"Expected Final Payment Date" has the meaning set forth in the Indenture.
"Holder" or "Transition Bondholder" has the meaning set forth in the
Indenture.
"Indenture" means the Indenture dated as of March 1, 1999, between the
First Issuer and The Bank of
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New York, as amended and supplemented from time to time, including any
Series Supplement.
"Overcollateralization Subaccount" has the meaning set forth in the
Indenture.
"Payment Date" has the meaning specified in the Indenture.
"Prepayment Amount" means, as of any date, the sum of all amounts currently
on deposit in the Reserve Subaccount arising from prepayment by customers
allocable to Intangible Transition Charges.
"Projected Transition Bond Balance" has the meaning specified in the
Indenture.
"Regulatory Period" means with respect to any Series (i) the period from
the Series Issuance Date therefor through and including the first Adjustment
Date (the "Initial Regulatory Period") and (ii) following the Initial Regulatory
Period until December 31, 2010, each period from and including each Adjustment
Date through but excluding the following Adjustment Date.
"Reserve Subaccount" has the meaning set forth in the Indenture.
"Sale Agreement" has the meaning set forth in the Indenture.
"Schedule Revision Date" has the meaning set forth in the Indenture.
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"Series" has the meaning specified in the Indenture.
"Series Issuance Date" has the meaning specified in the Indenture.
"Series Supplement" has the meaning specified in the Indenture.
"Transferred ITP" has the meaning specified in the Sale Agreement.
"Transition Bonds" has the meaning specified in the Indenture.
"Transition Bond Balance" has the meaning specified in the Indenture.
SECTION 2. Calculation Date Statements. For each Calculation Date, the
Servicer will provide to the First Issuer and the Bond Trustee a statement
indicating (i) the Transition Bond Balance and the Projected Transition Bond
Balance for each Series as of the immediately preceding Payment Date, (ii) the
amount on deposit in the Overcollateralization Subaccount and the Calculated
Overcollateralization Level as of the immediately preceding Payment Date, (iii)
the Projected Transition Bond Balance for each Payment Date prior to the next
Adjustment Date and the Servicer's projection of the Transition Bond Balance as
of each Payment Date prior to the next Adjustment Date, (iv) the Calculated
Overcollateralization Level for each
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Payment Date prior to the next Adjustment Date and the Servicer's
projection of the amount on deposit in the Overcollateralization Subaccount for
each Payment Date prior to the next Adjustment Date and (v) the projected ITC
Collections from the Payment Date immediately preceding the next Adjustment Date
through such Adjustment Date.
SECTION 3. Remittance Date Statements. On or before each Remittance Date,
the Servicer will prepare and furnish to the First Issuer and the Bond Trustee a
statement setting forth the aggregate amount remitted or to be remitted by the
Servicer to the Bond Trustee for deposit on such Remittance Date pursuant to
ss.5.10 of the Servicing Agreement and the Indenture.
Section 4. Monthly Allocation Date Statements. At least three Business Days
before each Monthly Allocation Date, the Servicer will prepare and furnish to
the First Issuer, the Bond Trustee, each Counterparty and the Rating Agencies a
statement setting forth the transfers and payments to be made on such Monthly
Allocation Date pursuant to Section 8.02(d) of the Indenture and the amounts
thereof.
Section 5. Payment Date Statements. At least three Business Days before
each Payment Date for each Series of Transition Bonds, the Servicer will
calculate the interest due on any floating rate Transition Bonds of such Series
and will prepare and furnish to the First Issuer and
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the Bond Trustee a statement setting forth the amounts to be paid to Holders of
Transition Bonds of such Series pursuant to Section 8.02(e) of the Indenture.
SECTION 6. Intangible Transition Charges Adjustments. (a) Prior to each
Calculation Date, the Servicer shall calculate (i) the Transition Bond Balance
as of the Payment Date immediately preceding such Calculation Date (a written
copy of which shall be delivered by the Servicer to the Bond Trustee within five
days following such Calculation Date) and (ii) the revised Intangible Transition
Charges with respect to the Transferred Intangible Transition Property for the
then-current Regulatory Period and any subsequent Regulatory Periods until a
Payment Date occurs, such that the Servicer projects that ITC Collections
therefrom allocable to the First Issuer will be sufficient so that (x) the
outstanding principal balance of each outstanding Series will equal the amount
provided for in the Expected Amortization Schedule therefor and the amount on
deposit in the Overcollateralization Subaccount will equal the Calculated
Overcollateralization Level, by the next Adjustment Date or the immediately
succeeding Payment Date after such Adjustment Date as specified in the Series
Supplement therefor or, if earlier with respect to any Series or Class of
Transition Bonds, by the Expected Final
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Payment Date therefor, taking into account the Available Reserve Amount.
(b) On each Calculation Date, the Servicer shall (i) file an Adjustment
Request with the PUC for such revised Intangible Transition Charges with respect
to the Transferred Intangible Transition Property to remain in effect until the
earlier of (A) the effective date of the next Intangible Transition Charges
Adjustment with respect to the Transition Bonds, (B) the Expected Final Payment
Date for any Series or Class of Transition Bonds and (C) December 31, 2010, (ii)
take all reasonable actions and make all reasonable efforts in order to
effectuate such revision to such Intangible Transition Charges and (iii)
promptly send to the Bond Trustee copies of all material notices and documents
relating to such revision.
SECTION 7. Servicer Advances. The Servicer shall not make any advances of
interest or principal on the Transition Bonds of any Series.
SECTION 8. Loss Calculations. Upon notice from the Seller, the Servicer
shall perform the calculations specified in Sections 5.01(c)(ii)(x) and
5.01(c)(ii)(y) of the Sale Agreement in the manner specified in such Sections
and notify the Issuer and the Bond Trustee thereof.
SECTION 9. Schedule Revision Date Schedules. Prior to each Schedule
Revision Date, the Servicer shall
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deliver to the First Issuer a replacement Schedule 1 to the Indenture and
replacement Schedules A and B to each Series Supplement to which such Schedule
Revision Date applies, adjusted to reflect the event giving rise to such
Schedule Revision Date and setting forth the Expected Amortization Schedule for
each Payment Date and the Monthly Allocated Interest Balance and Monthly
Allocated Principal Balance for each Monthly Allocation Date applicable thereto;
provided, however, that no such replacement Schedules A and B shall be required
with respect to a Series if the event giving rise to such Schedule Revision Date
is a redemption of the Transition Bonds of such Series in whole.