[Draft--10/25/97]
EXHIBIT 10.2
________________________________________________________________________________
TRANSITION PROPERTY SERVICING AGREEMENT
between
[NAME OF SPE]
Note Issuer
and
[NAME OF UTILITY]
Servicer
Dated as of [ ], 1997
________________________________________________________________________________
TABLE OF CONTENTS
Page
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ARTICLE I
Definitions
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SECTION 1.01. Definitions............................................... 2
SECTION 1.02. Other Definitional Provisions............................. 17
ARTICLE II
Appointment and Authorization
-----------------------------
SECTION 2.01. Appointment of Servicer; Acceptance of Appointment........ 18
SECTION 2.02. Authorization............................................. 19
SECTION 2.03. Dominion and Control Over the Transition Property......... 19
ARTICLE III
Billing Services
----------------
SECTION 3.01. Duties of Servicer........................................ 20
SECTION 3.02. Servicing and Maintenance Standards....................... 23
SECTION 3.03. Certificate of Compliance................................. 24
SECTION 3.04. Annual Report by Independent Public Accountants........... 25
ARTICLE IV
Services Related to True-Up Adjustments
---------------------------------------
SECTION 4.01. Periodic True-Up Adjustments.............................. 26
SECTION 4.02. Limitation of Liability................................... 36
ARTICLE V
The Transition Property
-----------------------
SECTION 5.01. Custody of Transition Property Records.................... 38
SECTION 5.02. Duties of Servicer as Custodian........................... 39
SECTION 5.03. Instructions; Authority to Act............................ 41
SECTION 5.04. Custodian's Indemnification............................... 41
SECTION 5.05. Effective Period and Termination.......................... 42
ARTICLE VI
The Servicer
------------
SECTION 6.01. Representations and Warranties of Servicer................ 43
SECTION 6.02. Indemnities of Servicer; Release of
Contents, p. ii
Claims................................................. 48
SECTION 6.03. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer.............................. 49
SECTION 6.04. Limitation on Liability of Servicer and Others............ 51
SECTION 6.05. [Name of Utility] Not To Resign as Servicer............... 52
SECTION 6.06. Servicing Compensation.................................... 53
SECTION 6.07. Compliance with Applicable Law............................ 54
SECTION 6.08. Access to Certain Records and Information Regarding
Transition Property.................................... 54
[SECTION 6.09. Appointments.............................................. 55
ARTICLE VII
Default
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SECTION 7.01. Servicer Default.......................................... 56
SECTION 7.02. Appointment of Successor.................................. 59
SECTION 7.03. Waiver of Past Defaults................................... 60
SECTION 7.04. Notice of Servicer Default................................ 61
ARTICLE VIII
Miscellaneous Provisions
------------------------
SECTION 8.01. Amendment................................................. 61
SECTION 8.02. Protection of Title to Trust.............................. 63
SECTION 8.03. Notices................................................... 64
SECTION 8.04. Assignment................................................ 65
SECTION 8.05. Limitations on Rights of Others........................... 65
SECTION 8.06. Severability.............................................. 65
SECTION 8.07. Separate Counterparts..................................... 66
SECTION 8.08. Headings.................................................. 66
SECTION 8.09. Governing Law............................................. 66
SECTION 8.10. Assignment to Note Trustee................................ 66
SECTION 8.11. Nonpetition Covenants..................................... 66
SECTION 8.12. Limitation of Liability of Note Trustee................... 67
Exhibits and Schedules
----------------------
Exhibit A Form of Monthly Servicer's Certificate
Exhibit B Form of Certificate of Compliance
Exhibit C Form of Routine Annual True-Up Mechanism Advice Letter
Exhibit D Form of Anniversary True-Up Mechanism Advice Letter
Exhibit E Form of Routine Quarterly True-Up Mechanism Advice Letter
Exhibit F Form of Quarterly Servicer's Certificate
Schedule 4.01(a) Expected Amortization Schedule
Contents, p.iii
Annex I
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Schedule 4 Servicer's Current Billing Practices
Schedule 6 Calculation of Aggregate Remittance Amount
TRANSITION PROPERTY SERVICING AGREEMENT dated as of [_],
1997, between [Name of SPE], a Delaware limited liability company
(the "Note Issuer"), and [Name of Utility], a California
corporation, as Servicer (the "Servicer").
RECITALS
A. Pursuant to the Statute and the Financing Order, the Seller and
the Note Issuer are concurrently entering into the Sale Agreement pursuant to
which the Seller is selling to the Note Issuer the Transition Property created
pursuant to the PU Code, the Financing Order and the Issuance Advice Letter
described in such agreement, and the Seller may sell other Transition Property
to the Note Issuer pursuant to Subsequent Sale Agreements.
B. In connection with its ownership of the Transition Property and
in order to collect the associated FTA Charges, the Note Issuer desires to
engage the Servicer to carry out the functions described herein. The Servicer
currently performs similar functions for itself with respect to its own charges
to its customers [and for others]. In addition, the Note Issuer desires to
engage the Servicer to act on its behalf in obtaining True-Up Adjustments from
the CPUC. The Servicer desires to perform all of these activities on behalf of
the Note Issuer.
2
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
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SECTION 1.01. Definitions. Whenever used in this Agreement, the
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following words and phrases shall have the following meanings:
"Actual FTA Payments" means the actual FTA Payments received by the
Servicer attributable to a particular Billing Period.
"Adjusted Principal Balance" means, as of any Payment Date, the
Principal Balance, plus the difference between the balance in the
Overcollateralization Subaccount and the Projected Overcollateralization
Subaccount Balance, plus the difference between the balance in the Capital
Subaccount and the Required Capital Level, less the difference between the
balance in the Reserve Subaccount and the Projected Reserve Subaccount Balance,
as of the next succeeding Payment Date, after giving effect to all payments made
on or expected to be made on such Payment Date.
"Advice Letter" means any filing made to the CPUC by the Servicer on
behalf of the Note Issuer with respect to the FTA Charges or any True-Up
Adjustment in the form of an advice letter, including an Issuance Advice Letter,
a Routine Annual True-Up Mechanism Advice Letter, an Anniversary True-Up
Mechanism Advice Letter, a Routine
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Quarterly True-Up Mechanism Advice Letter or a Non-Routine True-Up Mechanism
Advice Letter.
"Agreement" means this Transition Property Servicing Agreement,
together with all Exhibits, Schedules and Annexes hereto, as the same may be
amended and supplemented from time to time.
"Anniversary True-Up Mechanism Advice Letter" means an Advice Letter
filed with the CPUC at least fifteen days prior to the Financing Order
Anniversary Date in respect of a True-Up Adjustment, substantially in the form
of Exhibit D hereto. Any True-Up Adjustment required as a result of the
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Anniversary True-Up Mechanism Advice Letter will become effective on [the first
calendar day of the next Quarter following] [or before 90 days after] the
Financing Order Anniversary Date.
"Annual Accountant's Report" has the meaning set forth in Section
3.04.
"Annual Adjustment Date" means each [December 15], from and including
[December 15, 1998] to and including the last [December 15] preceding the
Retirement of the Notes; provided, however, that if any such day is not a
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Business Day, "Annual Adjustment Date" shall mean the Business Day immediately
preceding such day.
"Applicable ESP" means, with respect to each Customer, the ESP, if
any, providing "direct access" service to that Customer.
"Billing Period" means a [calendar month] [Statistical Month].
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"Bills" means each of the regular monthly bills, the summary bills,
the opening bills and the closing bills issued to Customers or ESPs by [Name of
Utility] on its own behalf and in its capacity as Servicer.
"Certificate of Compliance" has the meaning set forth in Section 3.03.
"Certificate Trustee" means the Person acting as certificate trustee
under the Trust Agreement.
"Collection Period" means the [calendar month] [Statistical Month]
immediately preceding the respective Remittance Date.
"Collections Curves" means the [Daily Collections Curve together with
the] Monthly Collections Curve.
"Consolidated ESP Billing" has the meaning set forth in Section 1 of
Annex I hereto.
"CPUC" means the California Public Utilities Commission or any
successor governmental agency that has regulatory authority over the True-Up
Adjustments contemplated by the Statute.
"CPUC Regulations" means all regulations, rules, tariffs and laws
applicable to public utilities or ESPs, as the case may be, and promulgated by,
enforced by or otherwise within the jurisdiction of the CPUC.
"Customers" means existing and future Residential Customers and Small
Commercial Customers of electricity located in the service territory in which
the Seller provided electricity services as of December 20, 1995.
5
["Daily Collections Curve" has the meaning set forth on Schedule 6 to
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Annex I hereto.]
"Delaware Trustee" means the Person acting as Delaware trustee under
the Trust Agreement.
"ESP" means an alternative energy service provider who has entered
into an ESP Service Agreement with the Seller.
"ESP Service Agreement" means an agreement between an ESP and the
Seller for the provision of "direct access" service to customers in accordance
with CPUC Order [______].
"Estimated FTA Payments" means the sum of the amounts remitted with
respect to a Billing Period during the six months following such Billing Period
based on the Collections Curves.
"Excess Remittance" means the amount, if any, by which Estimated FTA
Payments previously remitted to the Collection Account with respect to a Billing
Period exceed Actual FTA Payments received by the Servicer attributable to such
Billing Period, calculated on or before the Monthly Administrative Date in the
seventh calendar month following the applicable Billing Period.
"Expected Amortization Schedule" means Schedule 4.01(a) hereto, as the
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same may be amended from time to time pursuant to Section 4.01(a).
"Financing Order" means the order of the CPUC, Decision 97-09-[056]
[Edison], issued as of [September 3] [Edison], 1997, which became effective on
[October 9] [Edison], 1997.
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"Financing Order Anniversary Date" means [September 3] of each year.
"FTA Charges" means the non-bypassable, usage-based, per kilowatt hour
charges permitted to be levied upon the Customers by the Financing Order.
"FTA Collections" means FTA Payments received by the Servicer which
are remitted to the Collection Account.
"FTA Effective Date" means the date on which the initial FTA Charges
go into effect pursuant to the terms of the Financing Order and the first
Issuance Advice Letter.
"FTA End Date" means, depending on the context in which used, either:
(i) the date on which specific FTA Charges end because such FTA Charges have
been replaced with revised FTA Charges; or (ii) the FTA Termination Date.
"FTA Payments" means the payments made by Customers based on the FTA
Charges.
"FTA Start Date" means, depending on the context in which used,
either: (i) the FTA Effective Date; or (ii) the date on which specific revised
FTA Charges go into effect to replace previously existing FTA Charges.
"FTA Termination Date" means the date on which the FTA Charges will
cease to be billed pursuant to the terms of the Financing Order, provided that
the Notes and the Certificates shall have been paid in full.
"Infrastructure Bank" means the California Infrastructure and Economic
Development Bank or any successor in interest.
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"Indenture" means the Indenture dated as of [_], 1997, between the
Note Issuer and the Note Trustee, as the same may be amended and supplemented
from time to time.
"Initial Transition Property" means the Transition Property described
in the Sale Agreement.
"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 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 60 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
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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.
"Issuance Advice Letter" means an Advice Letter submitted to the CPUC
in connection with and immediately prior to the issuance of a Series of Notes,
which Advice Letter becomes effective five Business Days after filing pursuant
to the terms of the Financing Order. The first Issuance Advice Letter will
establish the initial FTA Charges, and subsequent Issuance Advice Letters will
modify the FTA Charges to support the issuance of additional Series of Notes.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind.
"Losses" has the meaning assigned to that term in Section 5.04.
"Monthly Administrative Date" means the tenth day of each calendar
month; provided, however, that if any such day is not a Servicer Business Day,
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"Monthly Administrative Date" shall mean the Servicer Business Day immediately
preceding such day.
"Monthly Collections Curve" has the meaning set forth on Schedule 6 to
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Annex I hereto.
"Monthly Servicer's Certificate" means a certificate, substantially in
the form of Exhibit A hereto, completed and executed by a Responsible Officer of
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the Servicer pursuant to Section 3.01(b)(i).
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"Non-Routine True-Up Mechanism Advice Letter" means an Advice Letter
filed with the CPUC in accordance with the Financing Order with respect to any
Non-Routine True-Up Adjustment, pursuant to which the related Non-Routine True-
Up Adjustment generally will become effective at the beginning of the first
Quarter that is at least 90 days after filing.
"Non-Routine True-Up Adjustment" has the meaning set forth in Section
4.01(c)(i).
"Note Trustee" means the Person acting as trustee under the Indenture,
its successors in interest and any successor trustee under the Indenture.
"Officer's Certificate" means a certificate signed by a Responsible
Officer.
"Opinion of Counsel" means one or more written opinions of counsel who
may be an employee of or counsel to the party providing such opinion of counsel,
which counsel shall be acceptable to the party receiving such opinion of
counsel.
"Overcollateralization Amount" means, with respect to any Series of
Notes, the amount specified in the related Issuance Advice Letter.
"Payment Date" means, with respect to any Series or Class, each March
25, June 25, September 25 and December 26 of each year, provided that if any
such date is not a Business Day, the Payment Date shall be the Business Day
immediately succeeding such date.
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"Principal Balance" means, as of any Payment Date, the sum of the
outstanding principal amount of each Series of Notes.
"Projected Overcollateralization Subaccount Balance" means, as of any
Payment Date, the sum of the projected Overcollateralization Amount for each
Series of Notes for such Payment Date set forth in a Series Supplement.
"Projected Principal Balance" means, as of any Payment Date, the sum
of the projected outstanding principal amount of each Series of Notes for such
Payment Date set forth in the Expected Amortization Schedule.
"Projected Reserve Subaccount Balance" means, as of any Payment Date,
the amount of reserve set forth in a Series Supplement, and will equal zero
($0.00) for each Payment Date.
"Pu Code" means the California Public Utilities Code, as amended from
time to time.
"Quarter" means each calendar quarter, specifically:
January 1 to and including March 31;
April 1 to and including June 30;
July 1 to and including September 30; and
October 1 to and including December 31.
"Quarterly Adjustment Filing Date" means each March 15, June 15, and
September 15 prior to the FTA Termination Date; provided, however, that if any
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such day is
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not a Business Day, "Quarterly Adjustment Filing Date" shall mean the Business
Day immediately preceding such day.
"Quarterly Administrative Date" means each March 10, June 10 and
September 10 of each year, from and including 1998, to and including the last
such date preceding the Retirement of the Notes; provided, however, that if any
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such day is not a Servicer Business Day, "Quarterly Administrative Date" shall
mean the Servicer Business Day immediately preceding such day.
"Quarterly Comparison" has the meaning set forth in Section
4.01(b)(ii)(1).
"Quarterly Servicer's Certificate" means a certificate, substantially
in the form of Exhibit F hereto, completed and executed by a Responsible Officer
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of the Servicer pursuant to Section 4.01(d)(ii).
"Regulatory Year" means (i) the period from the Closing Date through
and including December 31, 1998 (the "Initial Regulatory Year"), and (ii) for
each period following the Initial Regulatory Year until the FTA Termination
Date, the period from and including January 1 of each year through and including
December 31 of the same year (or, if sooner, through and including the FTA
Termination Date).
"Remittance Date" means the twentieth day of each calendar month or,
if such day is not a Business Day, the next succeeding Business Day.
"Remittance Shortfall" means the amount, if any, by which Actual FTA
Payments received by the Servicer
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attributable to a Billing Period exceed the Estimated FTA Payments previously
remitted to the Collection Account with respect to such Billing Period,
calculated on or before the Monthly Administrative Date in the seventh calendar
month following the applicable Billing Period.
"Required Capital Level" means, as of any Payment Date, the amount of
capital contribution by the Seller as set forth in a Series Supplement, and for
each Payment Date will be equal to the sum of 0.5 percent of the initial
principal amount of each then-outstanding Series of Notes issued pursuant to the
Indenture prior to that Payment Date, less $100,000 in the aggregate for all
Series of Notes.
"Residential Customers" means the existing and future residential
consumers of electricity, as identified in the Financing Order, located in the
service territory in which the Seller provided electricity services as of
December 20, 1995.
"Responsible Officer" means the chairman of the board, the chief
executive officer, the president, the vice chairman of the board, any vice
president, the treasurer, any assistant treasurer, the secretary, any assistant
secretary or the controller of the Servicer.
"Retirement of the Notes" means the day on which the final
distribution is made to the Note Trustee in respect of the last outstanding
Note.
"Routine Annual True-Up Mechanism Advice Letter" means an Advice
Letter filed with the CPUC at least fifteen days prior to the end of each
calendar year in respect of an
13
annual True-Up Adjustment, substantially in the form of Exhibit C hereto. The
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Routine Annual True-Up Mechanism Advice Letter will become effective on the
first calendar day of the next calendar year.
"Routine Quarterly True-Up Mechanism Advice Letter" means an Advice
Letter filed with the CPUC at least fifteen days prior to the end of each of the
first three Quarters of each calendar year in respect of a quarterly True-Up
Adjustment where such adjustment is triggered by the True-Up Adjustment
Mechanism, substantially in the form of Exhibit E hereto. The Routine Quarterly
---------
True-Up Mechanism Advice Letter will become effective on the first calendar day
of the next Quarter.
"Sale Agreement" means the Transition Property Purchase and Sale
Agreement dated as of the date hereof between [Name of Utility], as Seller, and
the Note Issuer.
"SEC" means the Securities and Exchange Commission or any successor
thereto.
"Seller" means [Name of Utility] and its successors in interest to the
extent permitted under the Sale Agreement.
"Servicer" means [Name of Utility], as the servicer of the Transition
Property, and each successor to [Name of Utility] (in the same capacity)
pursuant to Section 6.03 or 7.02.
"Servicer Business Day" means any Business Day on which the Servicer's
offices in the State of California are open for business.
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"Servicer Default" means an event specified in Section 7.01.
"Servicing Fee" means the fee payable on each Payment Date to the
Servicer for services rendered during the period from, but not including, the
preceding Payment Date to and including such Payment Date, determined pursuant
to Section 6.06.
"Small Commercial Customers" means the existing and future small
commercial consumers of electricity, as identified in the Financing Order,
located in the service territory in which the Seller provided electricity
services as of December 20, 1995.
["Statistical Month" means each of the periods created by dividing the
calendar year into twelve consecutive periods of 21 Servicer Business Days
each.]
"Statute" means Assembly Xxxx 1890, Chapter 854, California Statutes
of 1996, signed into law by the Governor of California on September 23, 1996, as
amended by Senate Xxxx 477, Chapter 275, California Statutes of 1997, signed
into law by the Governor of California on [_], 1997, and as further amended from
time to time.
"Subsequent Sale Agreement" has the meaning assigned to that term in
the definition of Subsequent Transition Property.
"Subsequent Sale Date" means any date on which Subsequent Transition
Property is to be sold to the Note Issuer pursuant to a Subsequent Sale
Agreement.
15
"Subsequent Transition Property" means any transition property as
defined in Section 840 of the PU Code sold to the Note Issuer by the Seller
pursuant to an agreement substantially similar to the Sale Agreement (a
"Subsequent Sale Agreement") created under the PU Code and the Financing Order
and specifically described in the related Issuance Advice Letter.
"Termination Notice" has the meaning assigned to that term in Section
7.01.
"Transition Costs" has the meaning assigned to that term in Section
840(f) of the PU Code.
"Transition Property" means the Initial Transition Property and, from
and after the applicable Subsequent Sale Date therefor, any Subsequent
Transition Property.
"Transition Property Records" has the meaning assigned to that term in
Section 5.01.
"True-Up Adjustment" means each revision to the FTA Charges made in
accordance with Section 4.01 or in connection with the conveyance to the Note
Issuer of Subsequent Transition Property.
"Trust Agreement" means the Amended and Restated Declaration and
Agreement of Trust dated as of [_], 1997, among the Infrastructure Bank, the
Delaware Trustee and the Certificate Trustee, as the same may be further amended
and supplemented from time to time.
"Trust Officer" means any officer assigned to the Corporate Trust
Office, including any managing director, vice president, assistant vice
president, assistant
16
treasurer, assistant secretary or any other officer of the Note Trustee
customarily performing functions similar to those performed by any of the above
designated officers and having direct responsibility for the administration of
this Agreement, and also, with respect to a particular matter, any other
officer, to whom such matter is referred because of such officer's knowledge of
and familiarity with the particular subject.
"Variance" means the occurrence on any Quarterly Administrative Date
or Annual Adjustment Date of a discrepancy whereby the Adjusted Principal
Balance as of the next succeeding Payment Date will be greater or lower than the
Projected Principal Balance as of such succeeding Payment Date, after giving
effect to all payments expected to be made on such next succeeding Payment Date.
SECTION 1.02. Other Definitional Provisions. (a) Capitalized
------------------------------
terms used herein and not otherwise defined herein have the meanings assigned to
them in the Indenture.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c) The words "hereof", "herein", "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Section, Schedule, Exhibit
and Annex references contained in this Agreement are references
17
to Sections, Schedules, Exhibits and Annexes in or to this Agreement unless
otherwise specified; and the term "including" shall mean "including without
limitation".
(d) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
ARTICLE II
Appointment and Authorization
-----------------------------
SECTION 2.01. Appointment of Servicer; Acceptance of Appointment.
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Subject to Section 6.05 and Article 7, the Note Issuer hereby appoints the
Servicer, and the Servicer hereby accepts such appointment, to perform the
Servicer's obligations pursuant to this Agreement on behalf of and for the
benefit of the Note Issuer in accordance with the terms of this Agreement and
applicable law. This appointment and the Servicer's acceptance thereof may not
be revoked except in accordance with the express terms of this Agreement.
SECTION 2.02. Authorization. With respect to all or any portion of
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the Transition Property, the Servicer shall be, and hereby is, authorized and
empowered by the Note Issuer to (a) execute and deliver, on behalf of itself
and/or the Note Issuer, as the case may be, any and all instruments, documents
or notices, and (b) on behalf of itself and/or the Note Issuer, as the case may
be, make any filing and participate in proceedings of any kind with any
governmental authorities, including with the CPUC. The Note Issuer shall
furnish the Servicer with such documents as
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have been prepared by the Servicer for execution by the Note Issuer, and with
such other documents as may be in the Note 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, the Note Issuer
shall furnish the Servicer with any powers of attorney or other documents
necessary or appropriate to enable the Servicer to carry out its duties
hereunder.
SECTION 2.03. Dominion and Control Over the Transition Property.
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Notwithstanding any other provision herein, the Servicer and the Note Issuer
agree that the Note Issuer shall have dominion and control over the Transition
Property, and the Servicer, in accordance with the terms hereof, is acting
solely as the servicing agent and custodian for the Note Issuer with respect to
the Transition Property and the Transition Property Records. The Servicer
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 the Note Issuer in the Transition Property,
in each case unless such action is required by law or court or regulatory order.
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ARTICLE III
Billing Services
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SECTION 3.01. Duties of Servicer. The Servicer, as agent for the Note
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Issuer, shall have the following duties:
(a) Duties of Servicer Generally. The Servicer's duties in general
-----------------------------
shall include management, servicing and administration of the Transition
Property; obtaining meter reads, calculating usage, billing, collections
and posting of all payments in respect of the Transition Property;
responding to inquiries by Customers, the CPUC, or any federal, local or
other state governmental authorities with respect to the Transition
Property; delivering Bills to Customers, investigating delinquencies,
accounting for collections and making periodic remittances; furnishing
periodic reports to the Note Issuer, the Note Trustee, the Certificate
Trustee and the Infrastructure Bank; and taking action in connection with
True-Up 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 regulations of the CPUC now
existing or hereafter promulgated. 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
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and xxxx calculation, billing, customer service functions, collections,
payment processing and remittance set forth in Annex I hereto.
(b) Reporting Functions.
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(i) Monthly Servicer's Certificate. On or before each Remittance
-------------------------------
Date, the Servicer shall prepare and deliver to the Note Issuer, the
Note Trustee, the Certificate Trustee and the Infrastructure Bank a
written report substantially in the form of Exhibit A hereto (a
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"Monthly Servicer's Certificate") setting forth certain information
relating to FTA Payments received by the Servicer during the
Collection Period preceding such Monthly Remittance Date.
(ii) Notification of Laws and Regulations. The Servicer shall
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immediately notify the Note Issuer, the Note Trustee, the Certificate
Trustee and the Infrastructure Bank in writing of any laws or CPUC
Regulations hereafter promulgated that have a material adverse effect
on the Servicer's ability to perform its duties under this Agreement.
(iii) Other Information. Upon the reasonable request of the Note
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Issuer, the Note Trustee, the Certificate Trustee or the
Infrastructure Bank, the Servicer shall provide to such Note Issuer,
Note Trustee, Certificate Trustee or Infrastructure Bank, as the case
may be, any
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public financial information in respect of the Servicer, or any
material information regarding the Transition Property to the extent
it is reasonably available to the Servicer, as may be reasonably
necessary and permitted by law for the Note Issuer, the Note Trustee,
the Certificate Trustee or the Infrastructure Bank to monitor the
performance by the Servicer hereunder.
(iv) Preparation of Reports to be Filed with the SEC. The
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Servicer shall prepare any reports required to be filed by the Note
Issuer under the securities laws, including a copy of each Monthly
Servicer's Certificate described in Section 3.01(b)(i), the annual
Certificate of Compliance described in Section 3.03, and the Annual
Accountant's Report described in Section 3.04.
SECTION 3.02. Servicing and Maintenance Standards. On behalf of the
------------------------------------
Note Issuer, the Servicer shall (a) manage, service, administer and make
collections in respect of the Transition Property with reasonable care and in
accordance with applicable law, including all applicable CPUC Regulations and
guidelines, using the same degree of care and diligence that the Servicer
exercises with respect to similar assets for its own account and, if applicable,
for others; (b) follow customary standards, policies and procedures for the
industry in performing its duties as Servicer; (c) use all reasonable efforts,
consistent with
22
its customary servicing procedures, to enforce, and maintain rights in respect
of, the Transition Property; and (d) comply with all laws and regulations
applicable to and binding on it relating to the 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 or any portion of the
Transition Property, which, in the Servicer's judgment, may include the taking
of legal action.
SECTION 3.03. Certificate of Compliance. The Servicer shall deliver
--------------------------
to the Note Issuer, the Note Trustee, the Certificate Trustee and the
Infrastructure Bank on or before August 31 of each year, commencing August 31,
1998 to and including the August 31 succeeding the Retirement of the Notes, an
Officer's Certificate substantially in the form of Exhibit B hereto (a
"Certificate of Compliance"), stating that: (i) a review of the activities of
the Servicer during the twelve months (or, in the case of the Certificate of
Compliance to be delivered on or before August 31, 1998, the period of time from
the date of this Agreement until June 30, 1998) ended the preceding June 30 and
of its performance under this Agreement has been made under such officer's
supervision, and (ii) to the best of such officer's knowledge, based on such
review, the Servicer has fulfilled all of its obligations in all material
respects under this Agreement throughout such twelve months (or, in the case of
the Certificate of Compliance to be delivered on or before August 31, 1998, the
period of time from the date
23
of this Agreement until June 30, 1998), or, if there has been a default in the
fulfillment of any such material obligation, specifying each such material
default known to such officer and the nature and status thereof.
SECTION 3.04. Annual Report by Independent Public Accountants. (a)
------------------------------------------------
The Servicer shall cause a firm of independent certified public accountants
(which may provide other services to the Servicer or the Seller) to prepare, and
the Servicer shall deliver to the Note Issuer, the Note Trustee, the Certificate
Trustee and the Infrastructure Bank, a report addressed to the Servicer (the
"Annual Accountant's Report"), which may be included as part of the Servicer's
customary auditing activities, for the information and use of the Note Issuer,
the Note Trustee, the Certificate Trustee and the Infrastructure Bank on or
before August 31 of each year, beginning August 31, 1998 to and including the
August 31, succeeding the Retirement of the Notes, to the effect that such firm
has performed certain procedures in connection with the Servicer's compliance
with its obligations under this Agreement during the preceding twelve months
(or, in the case of the Annual Accountants Report to be delivered on or before
August 31, 1998, the period of time from the date of this Agreement until June
30, 1998) ended June 30, identifying the results of such procedures and
including any exceptions noted.
(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
24
of Professional Ethics of the American Institute of Certified Public
Accountants.
ARTICLE IV
Services Related to True-Up Adjustments
---------------------------------------
SECTION 4.01. Periodic True-Up Adjustments. From time to time, until
-----------------------------
the Retirement of the Notes, the Servicer shall identify the need for True-Up
Adjustments and shall take all reasonable action to obtain and implement such
True-Up Adjustments, all in accordance with the following:
(a) Expected Amortization Schedule. The initial Expected Amortization
-------------------------------
Schedule is attached hereto as Schedule 4.01(a). In connection with the
----------------
issuance by the Note Issuer of any additional Series of Notes after the
Closing Date, the Servicer, on or prior to the Series Issuance Date
therefor, shall prepare an amended Expected Amortization Schedule which
shall set forth, as of each Payment Date through the scheduled Retirement
of the Notes, the sum of the aggregate principal amount of Notes of all
Series, including such additional Series, expected to be outstanding on
such Payment Date, as set forth on the Expected Amortization Schedule
therefor.
(b) Routine True-Up Adjustments.
----------------------------
(i) Routine Annual True-Up Adjustments.
-----------------------------------
(1) On or before each Annual Adjustment Date, the Servicer
shall: (A) calculate the Variance, if any, between the Adjusted
25
Principal Balance and the Projected Principal Balance as of the
next succeeding Payment Date; (B) estimate collections through
the December 31 immediately following such Annual Adjustment Date
and through December 31 of the year following the year of such
Annual Adjustment Date; (C) update the assumptions underlying the
FTA Charges, including energy usage volume, the rate of
delinquencies and write-offs, estimated expenses, and fees of the
Note Issuer, the Trust and the Infrastructure Bank to the extent
not fixed, and the Collections Curves; (D) determine the revised
FTA Charges that would restore: (1) the Principal Balance to the
Projected Principal Balance (2) the Overcollateralization Amount
to the Projected Overcollateralization Subaccount Balance, (3)
the Capital Subaccount Balance to the Required Capital Level, and
(4) the Reserve Subaccount Balance to the Projected Reserve
Subaccount Balance, in each case within twelve months after such
revised FTA Charges go into effect (and with respect to any True-
Up Adjustments occurring after the Scheduled Maturity Date,
determine the revised FTA Charges that would be sufficient to
retire the unpaid Principal Balance within the
26
earlier of (x) the date which is twelve months after the
Scheduled Maturity Date and (y) the Final Maturity Date); (E)
file a Routine Annual True-Up Mechanism Advice Letter with the
CPUC, substantially in the form attached hereto as Exhibit C, to
notify the CPUC of the FTA Charges for the coming year; and (F)
take all reasonable actions and make all reasonable efforts to
secure such True-Up Adjustment and to enforce the provisions of
the Statute which obligate the CPUC to approve rates at levels
sufficient to recover the FTA Payments in accordance with the
Expected Amortization Schedule.
(2) Each year on the date that is fifteen days before the
Financing Order Anniversary Date (or if such date is not a
Business Day, on the Business Day immediately preceding such
date), the Servicer shall: [Alternative 1: (A) calculate the
Variance, if any, between the Adjusted Principal Balance and the
Projected Principal Balance as of the next succeeding Payment
Date; (B) estimate collections through the end of the Quarter in
which the Financing Order Anniversary Date occurs; (C) update the
assumptions underlying the FTA Charges, including energy usage
volume, the rate of
27
delinquencies and write-offs, and estimated expenses and fees of
the Note Issuer, the Trust and the Infrastructure Bank to the
extent not fixed; (D) determine the revised FTA Charges that
would restore: (1) the Principal Balance to the Projected
Principal Balance (2) the Overcollateralization Amount to the
Projected Overcollateralization Subaccount Balance, (3) the
Capital Subaccount Balance to the Required Capital Level, and (4)
the Reserve Subaccount Balance to the Projected Subaccount
Balance, in each case within twelve months after such revised FTA
Charges go into effect (and with respect to any True-Up
Adjustments occurring after the Scheduled Maturity Date,
determine the revised FTA Charges that would be sufficient to
retire the unpaid Principal Balance within the earlier of (x) the
date which is twelve months after the Scheduled Maturity Date and
(y) the Final Maturity Date); (E) file an Anniversary True-Up
Mechanism Advice Letter with the CPUC, substantially in the form
attached hereto as Exhibit D; and (F) take all reasonable actions
---------
and make all reasonable efforts to secure such True-Up Adjustment
and to enforce the provisions of the Statute which obligate the
CPUC to
28
approve rates at levels sufficient to recover the FTA Payments in
accordance with the Expected Amortization Schedule] [Alternative
2: file an Anniversary True-Up Mechanism Advice Letter with the
CPUC, substantially in the form attached hereto as Exhibit D,
---------
stating that no adjustment to the FTA Charges is necessary
because either (A) the FTA Charges were adjusted during the most
recent calendar quarter or (B) there is no Variance between the
Adjusted Principal Balance and the Projected Principal Balance].
(3) In the case of a True-Up Adjustment pursuant to a
Routine Annual True-Up Mechanism Advice Letter, the Servicer
shall implement the revised FTA Charges, if any, as of the first
day of the following year.
(4) In the case of a True-Up Adjustment pursuant to an
Anniversary True-Up Mechanism Advice Letter, the Servicer shall
implement the revised FTA Charges, if any, on [the first calendar
day of the next Quarter following] [or before 90 days after] the
Financing Order Anniversary Date.
29
(ii) Routine Quarterly True-Up Adjustments.
--------------------------------------
(1) On or before each Quarterly Administrative Date, the
Servicer shall calculate the Variance between the Adjusted
Principal Balance and the Projected Principal Balance as of the
next succeeding Payment Date (each such calculation, a "Quarterly
Comparison").
(2) If the Quarterly Comparison reveals a Variance greater
than ___percent, the Servicer shall: (A) estimate collections
through the last day of the Quarter in which such Quarterly
Administrative Date occurs and through the last day of the twelve
month period following the date revised FTA Charges would go into
effect; (B) if necessary, update the assumptions underlying the
FTA Charges, including energy usage volume, the rate of
delinquencies and write-offs, and estimated expenses and fees of
the Note Issuer, the Trust and the Infrastructure Bank to the
extent not fixed; (C) determine the revised FTA Charges that
would restore: (1) the Principal Balance to the Projected
Principal Balance, (2) the Overcollateralization Amount to the
Projected Overcollateralization Subaccount Balance, (3) the
Capital Subaccount Balance to the
30
Required Capital Level and (4) the Reserve Subaccount Balance to
the Projected Reserve Subaccount Balance, in each case within
twelve months after such revised FTA Charges go into effect (and
with respect to any True-Up Adjustments occurring after the
Scheduled Maturity Date, determine the revised FTA Charges that
would be sufficient to retire the unpaid Principal Balance within
the earlier of (x) the date which is twelve months after the
Scheduled Maturity Date and (y) the Final Maturity Date); (D)
apply for a True-Up Adjustment by filing on or before the next
Quarterly Adjustment Filing Date following the Quarterly
Administrative Date a Routine Quarterly True-Up Mechanism Advice
Letter with the CPUC, substantially in the form attached hereto
as Exhibit E, to notify the CPUC of the revised FTA Charges and
---------
(E) take all reasonable actions and make all reasonable efforts
to secure the respective True-Up Adjustment and to enforce the
provisions of the Statute which obligate the CPUC to approve
rates at levels sufficient to recover the FTA Payments in
accordance with the Expected Amortization Schedule. If there is
no Variance, the Servicer shall not file a
31
Routine Quarterly True-Up Mechanism Advice Letter with the CPUC.
(3) The Servicer shall implement each revised FTA Charge
as of the first day of the Quarter following the Quarter in which
such Routine Quarterly True-Up Mechanism Advice Letter is filed.
(c) Non-Routine True-Up Adjustments.
--------------------------------
(i) Whenever the Servicer determines that the existing
model for calculating the FTA Charges should be amended or
revised, subject to the consent of the Note Issuer under the
conditions set forth in Section 3.17 of the Indenture, the
Servicer shall file a Non-Routine True-Up Mechanism Advice Letter
with the CPUC designating the adjustments to the model and any
corresponding adjustments to the FTA Charges (collectively, a
"Non-Routine True-Up Adjustment").
(ii) The Servicer shall take all reasonable actions and
make all reasonable efforts to secure the Non-Routine True-Up
Adjustments .
(iii) The Servicer shall implement any resulting adjustments
to the model and any resulting revised FTA Charges as of the
first day of the Quarter which begins at least
32
90 days after the Non-Routine True-Up Mechanism Advice Letter is
filed.
(d) Reports.
--------
(i) Notification of Advice Letter Filings and True-Up
-------------------------------------------------
Adjustments. Whenever the Servicer files an Advice Letter with the
------------
CPUC, the Servicer shall send a copy of such filing (together with a
copy of all notices and documents which, in the Servicer's reasonable
judgment, are material to the adjustments effected by such Advice
Letter) to the Note Issuer, the Note Trustee, the Certificate Trustee
and the Infrastructure Bank concurrently therewith. If any True-Up
Adjustment requested in any such Advice Letter filing does not become
effective on the applicable date as provided by the Financing Order,
the Servicer shall notify the Note Issuer, the Note Trustee, the
Certificate Trustee and the Infrastructure Bank by the end of the
second Servicer Business Day after the applicable date.
(ii) Quarterly Servicer's Certificate. Not later than the
---------------------------------
Remittance Date immediately prior to each Payment Date, the Servicer
shall deliver a written report substantially in the form of Exhibit F
---------
hereto (the "Quarterly Servicer's Certificate") to the Note Issuer,
the Note Trustee, the Certificate Trustee and the Infrastructure Bank.
33
(iii) Reports to Customers. (A) After each revised FTA Charge
---------------------
has gone into effect pursuant to a True-Up Adjustment, the Servicer
shall, to the extent and in the manner and timeframe required by CPUC
Regulations, cause to be prepared and delivered to Customers a notice
announcing such revised FTA Charges.
(B) In addition, at least once each year, to the extent
permitted by CPUC Regulations, the Servicer shall cause to be prepared
and delivered to Customers a notice stating, in effect, that the
Transition Property and the FTA Charges are owned by the Note Issuer
and not the Seller. Such notice shall be included either as an insert
to or on the back of the Bills delivered to such Customers or shall be
delivered to Customers by electronic means or such other means as the
Servicer or the Applicable ESP may from time to time use to
communicate with their respective customers.
(C) Except to the extent that applicable CPUC Regulations make
the Applicable ESP responsible for such costs, the Servicer shall pay
from its own funds all costs of preparation and delivery incurred in
connection with clauses (A) and (B) above, including but not limited
to printing and postage costs as the same may increase or decrease
from time to time.
34
SECTION 4.02. Limitation of Liability. (a) The Note Issuer and the
------------------------
Servicer expressly agree and acknowledge that:
(i) In connection with any True-Up Adjustment, the Servicer is
acting solely in its capacity as the servicing agent hereunder.
(ii) Neither the Servicer nor the Note Issuer is responsible in any
manner for, and shall have no liability whatsoever as a result of any
action, decision, ruling or other determination made or not made, or any
delay (other than any delay resulting from the Servicer's failure to file
the applications required by Section 4.01 in a timely manner or other
breach by the Servicer of its duties under this Agreement), by the CPUC in
any way related to the Transition Property or in connection with any True-
Up Adjustment, the subject of any filings under Section 3.02, any proposed
True-Up Adjustment, or the approval of any revised FTA Charges and the
scheduled adjustments thereto.
(iii) The Servicer shall have no liability whatsoever relating to the
calculation of any revised FTA Charges and the scheduled adjustments
thereto, including as a result of any inaccuracy of any of the assumptions
made in such calculation regarding expected energy usage volume and the
rate of delinquencies and write-offs, so long as the Servicer has acted in
good faith and has not acted negligently in connection
35
therewith, nor shall the Servicer have any liability whatsoever as a result
of any Person, including the Noteholders or the Certificateholders, not
receiving any payment, amount or return anticipated or expected or in
respect of any Note or Certificate generally, except only to the extent
that the same is caused by the Servicer's negligence, willful misconduct or
bad faith.
(b) Notwithstanding the foregoing, the Servicer hereby acknowledges
that the terms of this Section 4.02 are not intended to, and shall not, relieve
the Servicer of liability for any misrepresentation by the Servicer under
Section 6.01 or for any breach by the Servicer of its other obligations under
this Agreement.
ARTICLE V
The Transition Property
-----------------------
SECTION 5.01. Custody of Transition Property Records. To assure
---------------------------------------
uniform quality in servicing the Transition Property and to reduce
administrative costs, the Note Issuer hereby revocably appoints the Servicer,
and the Servicer hereby accepts such appointment, to act as the agent of the
Note Issuer and the Note Trustee as custodian of any and all documents and
records that the Seller shall keep on file, in accordance with its customary
procedures, relating to the Transition Property, including copies of the
Financing Order and Advice Letters relating thereto and all documents filed with
the CPUC in connection with any True-Up Adjustment (collectively, the
"Transition Property
36
Records"), which are hereby constructively delivered to the Note Trustee, as
pledgee of the Note Issuer (or, in the case of the Subsequent Transition
Property, will as of the applicable Subsequent Sale Date be constructively
delivered to the Note Trustee, as pledgee of the Note Issuer) with respect to
all Transition Property.
SECTION 5.02. Duties of Servicer as Custodian. (a) Safekeeping.
-------------------------------- ------------
The Servicer shall hold the Transition Property Records on behalf of the Note
Issuer and maintain such accurate and complete accounts, records and computer
systems pertaining to the Transition Property Records as shall enable the Note
Issuer to comply with this Agreement and the Indenture. In performing its duties
as custodian the Servicer shall act with reasonable care, using that degree of
care and diligence that the Servicer exercises with respect to comparable assets
that the Servicer services for itself or, if applicable, others. The Servicer
shall promptly report to the Note Issuer and the Note Trustee any failure on its
part to hold the Transition Property Records and maintain its accounts, records
and computer systems as herein provided and promptly take appropriate action to
remedy any such failure. Nothing herein shall be deemed to require an initial
review or any periodic review by the Note Issuer or the Note Trustee of the
Transition Property Records. The Servicer's duties to hold the Transition
Property Records on behalf of the Note Issuer set forth in this Section 5.02, to
the extent such Transition Property Records have not been previously transferred
to a successor
37
Servicer pursuant to Article VII, shall terminate three years after the earlier
of the date on which (i) the Servicer is succeeded by a successor Servicer in
accordance with Article VII hereof and (ii) no Notes of any Series are
outstanding.
(b) Maintenance of and Access to Records. The Servicer shall
-------------------------------------
maintain the Transition Property Records at [specify designated office] or at
such other office as shall be specified to the Note Issuer and the Note Trustee
by written notice at least 30 days prior to any change in location. The
Servicer shall make available for inspection to the Note Issuer and the Note
Trustee or their respective duly authorized representatives, attorneys or
auditors the Transition Property Records at such times during normal business
hours as the Note Issuer or the Note Trustee shall reasonably request and which
do not unreasonably interfere with the Servicer's normal operations. Nothing in
this Section 5.02(b) shall affect the obligation of the Servicer to observe any
applicable law (including any CPUC Regulations) prohibiting disclosure of
information regarding the Customers, and the failure of the Servicer to provide
access to such information as a result of such obligation shall not constitute a
breach of this Section 5.02(b).
(c) Release of Documents. Upon instruction from the Note Trustee,
---------------------
the Servicer shall release any Transition Property Records to the Note Trustee,
the Note Trustee's agent or the Note Trustee's designee, as the case may be, at
such place or places as the Note Trustee may designate, as
38
soon as practicable.
[(d) Defending Transition Property Against Claims. The Servicer
---------------------------------------------
shall institute any action or proceeding necessary to compel performance by the
CPUC or the State of California of any of their obligations or duties under the
PU Code, the Financing Order or any Advice Letter.]
SECTION 5.03. Instructions; Authority to Act. For so long as any
-------------------------------
Notes remain outstanding, the Servicer shall be deemed to have received proper
instructions with respect to the Transition Property Records upon its receipt of
written instructions signed by a Trust Officer of the Note Trustee.
SECTION 5.04. Custodian's Indemnification. The Servicer as custodian
----------------------------
shall indemnify the Note Issuer, the Trust, the Certificate Trustee, the
Delaware Trustee, the Note Trustee, the Infrastructure Bank, the Noteholders and
the Certificateholders and each of their respective officers, directors,
employees and agents for, and defend and hold harmless each such Person from and
against, any and all liabilities, obligations, losses, damages, payments, costs
or expenses of any kind whatsoever (collectively, "Losses") that may be imposed
on, incurred by or asserted against any such Person as the result of any
improper act or improper omission in any way relating to the maintenance and
custody by the Servicer, as custodian, of the Transition Property Records;
provided, however, that the Servicer shall not be liable for any portion of any
-------- -------
such amount resulting
39
from the willful misconduct, bad faith or negligence of the Note Issuer, the
Trust, the Certificate Trustee, the Delaware Trustee, the Note Trustee, the
Infrastructure Bank, the Noteholders or the Certificateholders, as the case may
be.
Indemnification under this Section shall survive resignation or
removal of the Note Trustee, the Delaware Trustee or the Certificate Trustee and
shall include reasonable fees and expenses of investigation and litigation.
SECTION 5.05. Effective Period and Termination. The Servicer's
---------------------------------
appointment as custodian shall become effective as of the Closing Date and shall
continue in full force and effect until terminated pursuant to this Section. If
any Servicer shall resign as Servicer in accordance with the provisions of this
Agreement or if all of the rights and obligations of any Servicer shall have
been terminated under Section 7.01, the appointment of such Servicer as
custodian shall be terminated by the Note Trustee or by the Holders of Notes
evidencing not less than 25 percent of the Outstanding Amount of the Notes of
all Series in the same manner as the Note Trustee or such Holders may terminate
the rights and obligations of the Servicer under Section 7.01.
ARTICLE VI
The Servicer
------------
SECTION 6.01. Representations and Warranties of Servicer. The
-------------------------------------------
Servicer makes the following representations and warranties, as of the Closing
Date, as of each
40
Subsequent Sale Date relating to the sale of Subsequent Transition Property
pursuant to a Subsequent Sale Agreement, and as of such other dates as expressly
provided in this Section 6.01, on which the Note Issuer and the Note Trustee is
deemed to have relied in entering into this Agreement relating to the servicing
of the Transition Property. The representations and warranties shall survive the
execution and delivery of this Agreement and the pledge thereof to the Note
Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer is duly organized
-------------------------------
and validly existing as a corporation in good standing under the laws of
the state of its incorporation, with the power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is presently conducted, and had at all relevant
times, and has, the requisite power, authority and legal right to service
the Transition Property and to hold the Transition Property Records as
custodian.
(b) Due Qualification. The Servicer is duly qualified to do business
------------------
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals in, all jurisdictions in which the ownership or
lease of property or the conduct of its business (including the servicing
of the Transition Property as required by this Agreement) shall require
such qualifications, licenses or approvals (except where the failure to so
qualify would not be reasonably
41
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 Transition Property).
(c) Power and Authority. The Servicer has the requisite power and
--------------------
authority to execute and deliver this Agreement and to carry out its terms;
and the execution, delivery and performance of this Agreement have been
duly authorized by the Servicer by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid
-------------------
and binding obligation of the Servicer enforceable in accordance with its
terms, subject to applicable insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws relating to or affecting
creditors' rights generally from time to time in effect and to general
principles of equity (including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing), regardless of
whether considered in a proceeding in equity or at law.
(e) No Violation. After giving effect to the release of the lien of
-------------
the [specify outstanding Indenture], 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
42
default under, the articles of incorporation or bylaws of the Servicer, or
any indenture, agreement or other instrument to which the Servicer is a
party or by which it shall be bound; nor result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of
any such indenture, agreement or other instrument; nor violate any law or
any order, rule or regulation applicable to the Servicer of any court or of
any Federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or its
properties.
(f) No Proceedings. Except as set forth on Schedule 6.01(f), 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 involving or relating to
the Servicer or the Note Issuer or, to the Servicer's knowledge, any other
Person: (i) asserting (A) the invalidity of this Agreement, or (B) the
invalidity of the Indenture, the Trust Agreement, any of the other Basic
Documents or the Notes or the Certificates, (ii) seeking to prevent the
issuance of the Notes or the Certificates or the consummation of any of the
transactions contemplated by this Agreement, the Indenture, the Trust
Agreement or any of the other
43
Basic Documents, (iii) 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 of, this Agreement,
the Indenture, the Trust Agreement, any of the other Basic Documents or the
Notes or the Certificates or (iv) relating to the Servicer and which might
adversely affect the Federal or state income tax attributes of the Notes or
the Certificates.
(g) Approvals. No approval, authorization, consent, order or other
----------
action of, or filing with, any court, Federal or state regulatory body,
administrative agency or other governmental instrumentality is required in
connection with the execution and delivery by the Servicer of this
Agreement, the performance by the Servicer of the transactions contemplated
hereby or the fulfillment by the Servicer of the terms hereof, except those
that have been obtained or made and those that the Servicer is required to
make in the future pursuant to Article IV hereof.
(h) Collections Curves. Each Collections Curve used in connection
-------------------
with Schedule 6 to Annex I hereto is accurate in all material respects, and
----------
the future delivery of each revised Collections Curve shall constitute a
representation and warranty that each such revised Collections Curve is
accurate in all material respects.
(i) Assumptions. The assumptions set forth in
------------
44
Schedule 6 to Annex I hereto are reasonable based upon historical
----------
performance and will be reasonable as they change from time to time.
(j) Reports and Certificates. Each report and certificate delivered
-------------------------
in connection with an Advice Letter will constitute a representation and
warranty by the Servicer that each such report or certificate, as the case
may be, is true and correct; 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 such
assumptions, forecasts or other predictions of future events being
reasonable based upon historical performance.
SECTION 6.02. Indemnities of Servicer; Release of Claims.
-------------------------------------------
(a) The Servicer shall be liable in accordance herewith only to the
extent of the obligations specifically undertaken by the Servicer under this
Agreement.
(b) The Servicer shall indemnify the Note Issuer, the Trust, the Note
Trustee, the Certificate Trustee, the Delaware Trustee, the Infrastructure Bank,
the Seller, the Noteholders and the Certificateholders and each of their
respective officers, directors, employees and agents for, and defend and hold
harmless each such Person from and against, any and all Losses that may be
imposed on, incurred by or asserted against any such Person as a result of
45
(i) the Servicer's willful misconduct, bad faith or 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) For purposes of Section 6.02(b), in the event of the termination
of the rights and obligations of [Name of Utility] (or any successor thereto
pursuant to Section 6.03) as Servicer pursuant to Section 7.01, or a resignation
by such Servicer pursuant to this Agreement, such Servicer shall be deemed to be
the Servicer pending appointment of a successor Servicer pursuant to Section
7.02.
(d) Indemnification under Sections 6.02(b) and 6.02(c) shall survive
the resignation or removal of the Note Trustee, the Delaware Trustee or the
Certificate Trustee or the termination of this Agreement and shall include
reasonable fees and expenses of investigation and litigation (including
reasonable attorneys fees and expenses).
(e) Except to the extent expressly provided for in this Agreement or
the other Basic Documents (including, without limitation, the Servicer's claims
with respect to the Servicing Fee and the payment of the purchase price of
Transition Property), the Servicer hereby releases and discharges the Note
Issuer, the Trust, the Note Trustee, the Certificate Trustee, the Delaware
Trustee, the Infrastructure Bank, the Noteholders and the Certificateholders and
each of their respective officers,
46
directors and agents (collectively, the "Released Parties") from any and all
actions, claims and demands whatsoever, whenever arising, which the Servicer, in
its capacity as Servicer or Seller, shall or may have against any such Person
relating to the Transition Property or the Servicer's activities with respect
thereto other than any actions, claims and demands arising out of the willful
misconduct or bad faith of the Released Parties. [add California release
language]
SECTION 6.03. Merger or Consolidation of, or Assumption of the
------------------------------------------------
Obligations of, Servicer. Any Person (a) into which the Servicer may be merged
-------------------------
or consolidated, (b) which may result from any merger or consolidation to which
the Servicer shall be a party or (c) which may succeed to the properties and
assets of the Servicer substantially as a whole, which Person 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 Servicer Default and no event which, after notice or lapse of
time, or both, would become a Servicer Default shall have occurred and be
continuing, (ii) the Servicer shall have delivered to the Note Issuer and the
Note 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
47
Section and that all conditions precedent provided for in this Agreement
relating to such transaction have been complied with and (iii) the Servicer
shall have delivered to the Note Issuer and the Note Trustee an Opinion of
Counsel either (A) stating that, in the opinion of such counsel, all filings to
be made by the Servicer, including filings with the CPUC pursuant to the PU
Code, have been executed and filed that are necessary fully to preserve and
protect the interest of the Note Issuer in the Transition Property and reciting
the details of such filings or (B) stating that, in the opinion of such counsel,
no such action shall be necessary to preserve and protect such interests.
Notwithstanding anything herein to the contrary, the execution of the foregoing
agreement of assumption and compliance with clauses (i), (ii) and (iii) above
shall be conditions to the consummation of the transactions referred to in
clauses (a), (b) or (c) above.
SECTION 6.04. Limitation on Liability of Servicer and Others.
-----------------------------------------------
Neither the Servicer nor any of the directors or officers or employees or agents
of the Servicer shall be liable to the Note Issuer, the Noteholders, the Trust,
the Certificateholders or any other Person, except as provided under this
Agreement, for any action taken or for refraining from the taking of any action
pursuant to this Agreement or for errors in judgment; provided, however, that
-------- -------
this provision shall not protect the Servicer or any such person against any
liability that would otherwise be imposed by reason of willful misconduct, bad
faith or negligence in the
48
performance of 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 Note Trustee or on any document of any
kind, prima facie properly executed and submitted by any Person, respecting any
matters arising under this Agreement.
Except as provided in this Agreement, the Servicer shall not be under
any obligation to appear in, prosecute or defend any legal action that shall not
be related to or incidental to its duties to service the Transition Property in
accordance with this Agreement, and that in its opinion may involve it in any
expense or liability.
SECTION 6.05. [Name of Utility] Not to Resign as Servicer. Subject
--------------------------------------------
to the provisions of Section 6.03, [Name of Utility] shall not resign from the
obligations and duties hereby imposed on it as Servicer under this Agreement
except upon either (a) a determination that the performance of its duties under
this Agreement shall no longer be permissible under applicable law or (b)
satisfaction of the following: (i) the Rating Agency Condition shall have been
satisfied, (ii) there shall have been no increase in the Servicing Fee as a
result of such resignation, (iii) the CPUC has approved such resignation and
(iv) notice of such resignation shall have been given to the Infrastructure
Bank. Notice of any such determination permitting the resignation of [Name of
Utility] shall be communicated to the Note Issuer, the Note
49
Trustee and the Infrastructure Bank at the earliest practicable time (and, if
such communication is not in writing, shall be confirmed in writing at the
earliest practicable time) and any such determination shall be evidenced by an
Opinion of Counsel to such effect delivered to the Note Issuer and the Note
Trustee concurrently with or promptly after such notice. No such resignation
shall become effective until a successor Servicer shall have assumed the
responsibilities and obligations of [Name of Utility] in accordance with Section
7.02.
SECTION 6.06. Servicing Compensation. (a) In consideration for its
-----------------------
services hereunder, until the Retirement of the Notes, the Servicer shall
receive an annual Servicing Fee in an amount equal to the sum of __ percent of
the then outstanding principal amount of each Series of the Notes. The Servicer
also shall be entitled to retain as additional compensation (i) any interest
earnings on FTA Payments received by the Servicer and invested by the Servicer
pursuant to Section 6(d) of Annex I hereto during each Collection Period prior
to remittance to the Collection Account and (ii) all late payment charges, if
any, collected from Customers or ESPs. The Servicer shall set forth the amount
of each component of its compensation in the Quarterly Servicer's Certificate
with respect to the period covered by such certificate.
(b) The Servicing Fee set forth in Section 6.06(a) above shall be
paid to the Servicer by the Note Trustee in four separate installments each
year, on
50
each Payment Date, by wire transfer of immediately available funds from the
Collection Account to an account designated by the Servicer in accordance with
the priorities set forth in Section 8.02(d) of the Indenture. Any portion of the
Servicing Fee not paid on such date shall be added to the Servicing Fee payable
on the subsequent Payment Date.
(c) The Servicer shall be required to pay from its own account all
expenses incurred by it in connection with its activities hereunder (including
any fees to and disbursements by accountants, counsel, or any other Person, any
taxes imposed on the Servicer and any expenses incurred in connection with
reports to Noteholders and Certificateholders) out of the compensation retained
by or paid to it pursuant to this Section 6.06, and shall not be entitled to any
extra payment or reimbursement therefor.
SECTION 6.07. Compliance with Applicable Law. The Servicer covenants
-------------------------------
and agrees, in servicing the Transition Property, to comply with all laws
applicable to, and binding upon, the Servicer and relating to such Transition
Property the noncompliance with which would have a material adverse effect on
the value of the Transition Property; provided, however, that the foregoing is
-------- -------
not intended to, and shall not, impose any liability on the Servicer for
noncompliance with any law that the Servicer is contesting in good faith in
accordance with its customary standards and procedures.
SECTION 6.08. Access to Certain Records and Information Regarding
---------------------------------------------------
Transition Property. The Servicer
--------------------
51
shall provide to the Noteholders, the Note Trustee, the Certificate Trustee and
the Infrastructure Bank access to the Transition Property Records in such cases
where the Noteholders, the Note Trustee, the Certificate Trustee and the
Infrastructure Bank shall be required by applicable law to be provided access to
such records. Access shall be afforded without charge, but only upon reasonable
request and during normal business hours at the respective offices of the
Servicer. Nothing in this Section shall affect the obligation of the Servicer to
observe any applicable law (including any CPUC Regulations) prohibiting
disclosure of information regarding the Customers, and the failure of the
Servicer to provide access to such information as a result of such obligation
shall not constitute a breach of this Section.
SECTION 6.09. Appointments. The Servicer may at any time appoint any
-------------
Person to perform all or any portion of its obligations as Servicer hereunder;
provided, however, that the Rating Agency Condition shall have been satisfied in
-------- -------
connection therewith; provided further that the Servicer shall remain obligated
-------- -------
and be liable to the Note Issuer, the Note Trustee and the Noteholders for the
servicing and administering of the Transition Property in accordance with the
provisions hereof without diminution of such obligation and liability by virtue
of the appointment of such Person and to the same extent and under the same
terms and conditions as if the Servicer alone were servicing and administering
the Transition Property. The fees and expenses of
52
such Person shall be as agreed between the Servicer and such Person from time to
time and none of the Note Issuer, the Note Trustee, the Noteholders or any other
Person shall have any responsibility therefor or right or claim thereto. Any
such appointment shall not constitute a Servicer resignation under Section 6.05.
ARTICLE VII
Default
-------
SECTION 7.01. Servicer Default. If any one of the following events
-----------------
(a "Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to deposit in the Collection Account
on behalf of the Note 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 the Note Issuer or the Note
Trustee or after discovery of such failure by an officer of the Servicer;
or
(b) any failure on the part of the Servicer or the Seller, as the
case may be, duly to observe or to perform in any material respect any
other covenants or agreements 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
rights of Noteholders or Certificateholders and (ii) continue unremedied
for a period of 60 days after the date on which written notice of such
failure, requiring the
53
same to be remedied, shall have been given (A) to the Servicer or the
Seller (as the case may be) by the Note Issuer or (B) to the Servicer or
the Seller (as the case may be) by the Note Trustee or by the Holders of
Notes evidencing not less than 25 percent of the Outstanding Amount of the
Notes of all Series; or
(c) any representation or warranty made by the Servicer in this
Agreement shall prove to have been incorrect when made, which has a
material adverse effect on the Note Issuer or the Certificateholders and
which material adverse effect continues unremedied for a period of 60 days
after the date on which written notice thereof, requiring the same to be
remedied, shall have been delivered to the Servicer by the Note Issuer or
the Note Trustee; or
(d) an Insolvency Event occurs with respect to the Servicer or the
Seller;
then, and in each and every case, so long as the Servicer Default shall not have
been remedied, either the Note Trustee, or the Holders of Notes evidencing not
less than 25 percent of the Outstanding Amount of the Notes of all Series, by
notice then given in writing to the Servicer (and to the Note Trustee if given
by the Noteholders) (a "Termination Notice") may terminate all the rights and
obligations (other than the obligations set forth in Section 6.02 hereof) of the
Servicer under this Agreement. In addition, upon a Servicer Default described
in Section 7.01(a), each of the following shall be entitled to
54
apply to the CPUC for sequestration and payment of revenues arising with respect
to the Transition Property: (1) the Certificateholders and the Certificate
Trustee as beneficiary of any statutory lien permitted by the PU Code; (2) the
Note Issuer or its assignees; or (3) pledgees or transferees, including
transferees under Section 844 of the PU Code, of the Transition Property. On or
after the receipt by the Servicer of a Termination Notice, all authority and
power of the Servicer under this Agreement, whether with respect to the Notes,
the Transition Property, the FTA Charges or otherwise, shall, without further
action, pass to and be vested in such successor Servicer as may be appointed
under Section 7.02; and, without limitation, the Note Trustee is hereby
authorized and empowered to execute and deliver, on behalf of the predecessor
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such Termination Notice, whether to
complete the transfer of the Transition Property Records and related documents,
or otherwise. The predecessor Servicer shall cooperate with the successor
Servicer, the Note Issuer and the Note Trustee in effecting the termination of
the responsibilities and rights of the predecessor Servicer under this
Agreement, including the transfer to the successor Servicer for administration
by it of all 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
55
Transition Property or the FTA Charges. All reasonable costs and expenses
(including attorneys fees and expenses) incurred in connection with transferring
the Transition Property Records to the successor Servicer and amending this
Agreement to reflect such succession as Servicer pursuant to this Section shall
be paid by the predecessor Servicer upon presentation of reasonable
documentation of such costs and expenses.
SECTION 7.02. Appointment of Successor. (a) Upon the Servicer's
-------------------------
receipt of a Termination Notice pursuant to Section 7.01 or the Servicer's
resignation or removal in accordance with the terms of this Agreement, the
predecessor Servicer shall continue to perform its functions as Servicer under
this Agreement until a successor Servicer shall have assumed in writing the
obligations of the Servicer hereunder as described below. In the event of the
Servicer's termination hereunder, the Note Trustee shall appoint a successor
Servicer, and the successor Servicer shall accept its appointment by a written
assumption in form acceptable to the Note Issuer and the Note Trustee. In the
event of the Servicer's termination hereunder, the Note Trustee may petition a
court of competent jurisdiction to appoint any Person (a) satisfying the
following criteria: [NEED TO DEVELOP CRITERIA] and (b) approved in writing by
the Rating Agencies, as the successor to the Servicer under this Agreement.
(b) Upon appointment, the successor Servicer shall be the successor
in all respects to the predecessor
56
Servicer and shall be subject to all the responsibilities, duties and
liabilities arising thereafter relating thereto placed on the predecessor
Servicer and shall be entitled to the Servicing Fee and all the rights granted
to the prede cessor Servicer by the terms and provisions of this Agreement.
SECTION 7.03. Waiver of Past Defaults. The Holders of Notes
------------------------
evidencing not less than a majority of the Outstanding Amount of the Notes of
all Series may, on behalf of all Noteholders, waive in writing any default by
the Servicer in the performance of its obligations hereunder and its
consequences, except a default in making any required deposits to the Collection
Account in accordance with this Agreement. Upon any such waiver of a past
default, such default shall cease to exist, and any Servicer Default arising
therefrom shall be deemed to have been remedied for every purpose of this
Agreement. No such waiver shall extend to any subsequent or other default or
impair any right consequent thereto.
SECTION 7.04. Notice of Servicer Default. The Servicer shall deliver
---------------------------
to the Note Issuer, the Note Trustee, the Infrastructure Bank and the Rating
Agencies, 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 which with the giving
57
of notice or lapse of time, or both, would become a Servicer Default under
Section 7.01(a) or (b).
ARTICLE VIII
Miscellaneous Provisions
------------------------
SECTION 8.01. Amendment. This Agreement may be amended in writing by
----------
the Servicer and the Note Issuer with the prior written consent of the Note
Trustee, but without the consent of any of the Noteholders or
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement or for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions in this Agreement or
of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that such action shall not, as evidenced
-------- -------
by an Officer's Certificate delivered to the Note Issuer and the Note Trustee,
adversely affect in any material respect the interests of any Noteholder or
Certificateholder.
This Agreement may also be amended in writing from time to time by the
Servicer and the Note Issuer with the prior written consent of the Note Trustee
and the prior written consent of the Holders of Notes evidencing not less than a
majority of the Outstanding Amount of the Notes of all Series, for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the
Noteholders or the Certificateholders; provided,
--------
58
however, that no such amendment shall (a) increase or reduce in any manner the
-------
amount of, or accelerate or delay the timing of, FTA Collections or (b) reduce
the aforesaid percentage of the Outstanding Amount of the Notes, the Holders of
which are required to consent to any such amendment, without the consent of the
Holders of all the outstanding Notes.
Promptly after the execution of any such amendment and the requisite
consents, the Note Issuer shall furnish written notification of the substance of
such amendment to the Note Trustee and each of the Rating Agencies.
It shall not be necessary for the consent of Noteholders pursuant to
this Section to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof.
Prior to its consent to any amendment to this Agreement, the Note
Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating
that such amendment is authorized or permitted by this Agreement. The Note
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Note Trustee's own rights, duties or immunities under this Agreement
or otherwise.
SECTION 8.02. Protection of Title to Trust. (a) The Servicer shall
-----------------------------
maintain accounts and records as to the Transition Property accurately and in
accordance with its standard accounting procedures and in sufficient detail to
permit reconciliation between FTA Payments received by
59
the Servicer and FTA Collections from time to time deposited in the Collection
Account.
(b) The Servicer shall permit the Note Trustee and its agents at any
time during normal business hours, upon reasonable notice to the Servicer and to
the extent it does not unreasonably interfere with the Servicer's normal
operations, to inspect, audit and make copies of and abstracts from the
Servicer's records regarding the Transition Property and the FTA Charges.
Nothing in this Section 8.02(b) shall affect the obligation of the Servicer to
observe any applicable law (including any CPUC Regulations) prohibiting
disclosure of information regarding the Customers, and the failure of the
Servicer to provide access to such information as a result of such obligation
shall not constitute a breach of this Section 8.02(b).
SECTION 8.03. Notices. All demands, notices and communications upon
--------
or to the Servicer, the Note Issuer, the Note Trustee, the Infrastructure Bank,
the Certificate Trustee or the Rating Agencies under this Agreement shall be in
writing, personally delivered or mailed or sent by telecopy or other similar
form of rapid transmission, and shall be deemed to have been duly given upon
receipt (a) in the case of the Servicer, to [Name of Utility], [_], [_],
Attention of [_] ([_]), (b) in the case of the Note Issuer, to [Name of SPE],
[_], Attention of [_], (c) in the case of the Note Trustee, at the Corporate
Trust Office, (d) in the case of the Infrastructure Bank, to [_],
60
[_], Attention of [_], (e) in the case of the Certificate Trustee, to [_], [_],
Attention of [_], (f) in the case of Moody's, to Xxxxx'x Investors Service,
Inc., ABS Monitoring Department, 00 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, (g)
in the case of Standard & Poor's, to Standard & Poor's Corporation, 00 Xxxxxxxx
(00xx Xxxxx), Xxx Xxxx, Xxx Xxxx 00000, Attention of Asset Backed Surveillance
Department, (h) in the case of Fitch, to Fitch Investors Service, L.P., Xxx
Xxxxx Xxxxxx Xxxxx, Xxx Xxxx, XX 00000, Attention of [_], [(i) in the case of
Duff & Xxxxxx, to Xxxx & Xxxxxx Credit Rating Company, 00 Xxxx Xxxxxx Xxxxxx,
Xxxxx 0000, Xxxxxxx, XX 00000, Attention of [_]_], or (i) [(j)] as to each of
the foregoing, at such other address as shall be designated by written notice to
the other parties.
SECTION 8.04. Assignment. Notwithstanding anything to the contrary
-----------
contained herein, except as provided in Section 6.03 and as provided in the
provisions of this Agreement concerning the resignation of the Servicer, this
Agreement may not be assigned by the Servicer.
SECTION 8.05. Limitations on Rights of Others. The provisions of
--------------------------------
this Agreement are solely for the benefit of the Servicer and the Note Issuer
and, to the extent provided herein or in the Basic Documents, the Trust, the
Note Trustee, the Certificate Trustee, the Noteholders, the Certificateholders
and the Infrastructure Bank, and nothing in this Agreement, whether express or
implied, shall be construed to give to any other Person any legal or equitable
61
right, remedy or claim in the Transition Property or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
SECTION 8.06. Severability. Any provision of this Agreement that is
-------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 8.07. Separate Counterparts. This Agreement may be executed
----------------------
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 8.08. Headings. The headings of the various Articles and
---------
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 8.09. Governing Law. This Agreement shall be construed in
--------------
accordance with the laws of the State of California, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 8.10. Assignment to Note Trustee. The Servicer hereby
---------------------------
acknowledges and consents to the collateral
62
assignment of any or all of the Note Issuer's rights and obligations hereunder
to the Note Trustee and to the further assignment of the Note Trustee's rights
and obligations under the Indenture to the Certificate Trustee.
SECTION 8.11. Nonpetition Covenants. Notwithstanding any prior
----------------------
termination of this Agreement or the Indenture, but subject to the CPUC's right
to order the sequestration and payment of revenues arising with respect to the
Transition Property notwithstanding any bankruptcy, reorganization or other
insolvency proceedings with respect to the debtor, pledgor or transferor of the
Transition Property pursuant to Section 843(e) and (g) of the PU Code, the
Servicer shall not, prior to the date which is one year and one day after the
termination of the Indenture with respect to the Note Issuer, acquiesce,
petition or otherwise invoke or cause the Note Issuer or the Trust to invoke the
process of any court or governmental authority for the purpose of commencing or
sustaining a case against the Note Issuer or the Trust under any Federal or
state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Note Issuer or the Trust or any substantial part of the property of the
Note Issuer or the Trust, or ordering the winding up or liquidation of the
affairs of the Note Issuer or the Trust.
SECTION 8.12. Limitation of Liability. It is expressly understood
------------------------
and agreed by the parties hereto that (a) this Agreement is executed and
delivered by Bankers
63
Trust Company, not individually or personally but solely as Note Trustee of the
Trust, in the exercise of the powers and authority conferred and vested in it,
(b) the representations, undertakings and agreements herein made on the part of
the Trust are made and intended not as personal representations, undertakings
and agreements by Bankers Trust Company, but are made and intended for the
purpose of binding only the Trust, (c) nothing herein contained shall be
construed as creating any liability on Bankers Trust Company, individually or
personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties who
are signatories to this Agreement and by any Person claiming by, through or
under such parties and (d) under no circumstances shall Bankers Trust Company,
be personally liable for the payment of any indebtedness or expenses of the
Trust or be liable for the breach or failure of any obligation, representation,
warranty or covenant made or undertaken by the Trust under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers as of the day and year first above
written.
[NAME OF SPE],
by
_______________________________
Title:
64
[NAME OF UTILITY],
by
_______________________________
Title:
Acknowledged and Accepted:
BANKERS TRUST COMPANY, not
in its individual capacity
but solely as Note Trustee,
by
________________________
