EXHIBIT 10.1
FORM OF TRANSITION PROPERTY
PURCHASE AND SALE AGREEMENT
[Draft--10/25/97]
EXHIBIT 10.1
________________________________________________________________________________
TRANSITION PROPERTY PURCHASE AND SALE AGREEMENT
between
[NAME OF SPE]
Note Issuer
and
[NAME OF UTILITY]
Seller
Dated as of [ ], 1997
________________________________________________________________________________
TABLE OF CONTENTS
Page
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ARTICLE I
Definitions
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SECTION 1.01. Definitions............................................. 1
SECTION 1.02. Other Definitional Provisions........................... 6
ARTICLE II
Conveyance of Transition Property
---------------------------------
SECTION 2.01. Conveyance of Transition Property....................... 7
ARTICLE III
Representations and Warranties of Seller
----------------------------------------
SECTION 3.01. Organization and Good Standing.......................... 8
SECTION 3.02. Qualification........................................... 9
SECTION 3.03. Power and Authority..................................... 9
SECTION 3.04. Binding Obligation...................................... 9
SECTION 3.05. No Violation............................................ 10
SECTION 3.06. No Proceedings.......................................... 11
SECTION 3.07. Approvals............................................... 11
SECTION 3.08. The Transition Property................................. 12
SECTION 3.09. Outstanding Indenture................................... 16
ARTICLE IV
Covenants of the Seller
-----------------------
SECTION 4.01. Corporate Existence..................................... 16
SECTION 4.02. No Liens................................................ 17
SECTION 4.03. Delivery of Collections................................. 17
SECTION 4.04. Notice of Liens......................................... 17
SECTION 4.05. Compliance With Law..................................... 17
SECTION 4.06. Covenants Related to the
Transition Property................................... 18
SECTION 4.07. Protection of Title..................................... 19
SECTION 4.08. Nonpetition Covenants................................... 20
SECTION 4.09. Taxes................................................... 21
Contents, p.ii
ARTICLE V
The Seller
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SECTION 5.01. Liability of Seller; Indemnities........................ 21
SECTION 5.02. Merger or Consolidation of, or Assumption
of the Obligations of, Seller........................... 24
SECTION 5.03. Limitation on Liability of Seller and
Others.................................................. 25
ARTICLE VI
Miscellaneous Provisions
------------------------
SECTION 6.01. Amendment............................................... 26
SECTION 6.02. Notices................................................. 27
SECTION 6.03. Assignment.............................................. 28
SECTION 6.04. Limitations on Rights of Others......................... 29
SECTION 6.05. Severability............................................ 29
SECTION 6.06. Separate Counterparts................................... 29
SECTION 6.07. Headings................................................ 30
SECTION 6.08. Governing Law........................................... 30
SECTION 6.09. Assignment to Note Trustee.............................. 30
SECTION 6.10. Limitation of Liability................................. 31
TRANSITION PROPERTY PURCHASE AND SALE
AGREEMENT dated as of [_], 1997,between [NAME OF SPE], a Delaware
limited liability company (the "Note Issuer"), and [NAME OF
UTILITY], a California corporation ("Name of Utility"), as Seller
(the "Seller").
WHEREAS the Note Issuer desires to purchase the Transition Property
created pursuant to the PU Code, the Financing Order and the Issuance Advice
Letter; and
WHEREAS the Seller is willing to sell such Transition Property to the
Note Issuer.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Definitions. Whenever used in this Agreement, the
------------
following words and phrases shall have the following meanings:
"Agreement" means this Transition Property Purchase and Sale
Agreement, as the same may be amended and supplemented from time to time.
2
"Certificates" means the Series of Certificates issued under the Trust
Agreement whose Series Issuance Date is the date of this Agreement.
"Certificate Trustee" means the Person acting as certificate trustee
under the Trust Agreement.
"CPUC" means the California Public Utilities Commission or any
successor in interest.
"CPUC Regulations" has the meaning assigned to that term in the
Servicing Agreement.
"Customers" means existing and future Residential Customers and Small
Commercial Customers.
"Delaware Trustee" means the Person acting as Delaware trustee under
the Trust Agreement.
"Financing Order" means the order of the CPUC, Decision 97-09-[056]
[Edison], issued as of as of [September 3] [Edison], 1997, which became
effective on [October 9] [Edison], 1997.
"FTA Charges" means the non-bypassable, usage-based, per kilowatt hour
charges permitted to be levied upon the Customers by the Financing Order.
"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.
"Infrastructure Bank" means the California Infrastructure and Economic
Development Bank or any successor in interest.
3
"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 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 Advice [______]-E (U39E), dated
[________], 1997, filed with the CPUC by the Seller pursuant to the Financing
Order.
4
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind.
"Losses" has the meaning assigned to that term in Section 5.01(d).
"Note Issuer" has the meaning set forth in the heading of this
Agreement.
"Notes" means the Series of Notes issued under the Indenture whose
Series Issuance Date is the date of this Agreement.
"Note Trustee" means the Person acting as trustee under the Indenture.
"Officer's Certificate" means a certificate signed by the chairman of
the board, the president, the vice chairman of the board, any vice president,
the treasurer, any assistant treasurer, the secretary or any assistant
secretary of the Seller.
"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.
5
"PU Code" means the California Public Utilities Code, as amended from
time to time.
"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.
"Seller" means [Name of Utility] and its successors in interest to the
extent permitted hereunder.
"Servicer Default" means an event specified in Section 7.01 of the
Servicing Agreement.
"Servicing Agreement" means that certain Transition Property Servicing
Agreement dated as of the date hereof between [Name of Utility], as Servicer,
and the Note Issuer.
"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.
"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.
"Transition Costs" has the meaning assigned to that term in Section
840(f) of the PU Code.
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"Transition Property" means the "Transition Property" contemplated by
the Financing Order and specifically described in the Issuance Advice Letter.
"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.
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 and Exhibit
references contained in this Agreement are references to Sections, Schedules and
Exhibits in or to this Agreement unless otherwise specified; and the term
"including" shall mean "including without limitation".
(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.
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ARTICLE II
Conveyance of Transition Property
---------------------------------
SECTION 2.01. Conveyance of Transition Property. In consideration of
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the Note Issuer's delivery to or upon the order of the Seller of $[_], the
Seller does hereby sell, transfer, assign, set over and otherwise convey to the
Note Issuer, without recourse (subject to the obligations herein), all right,
title and interest of the Seller in and to the Transition Property (such sale,
transfer, assignment, set over and conveyance of the Transition Property
includes, to the fullest extent permitted by the Statute, the assignment of all
revenues, collections, claims, rights, payments, money or proceeds of or arising
from the FTA Charges pursuant to the Financing Order and the Issuance Advice
Letter). Such sale, transfer, assignment, set over and conveyance is hereby
expressly stated to be a sale and, pursuant to Section 844(a) of the PU Code,
shall be treated as an absolute transfer of all of the Seller's right, title and
interest (as in a true sale), and not as a pledge or other financing, of the
Transition Property, other than for federal and state income and franchise tax
purposes. [If such sale, transfer, assignment, set over and conveyance is held
not to be a true sale as contemplated by Section 844(a) of the PU Code, then
such sale, transfer, assignment, set over and conveyance shall be treated as a
pledge of the Transition Property and the Seller shall be deemed to have granted
a security
8
interest to the Note Issuer in the Transition Property.] [Discuss need of back-
up security interest]
ARTICLE III
Representations and Warranties of Seller
----------------------------------------
The Seller makes the following representations and warranties, as of
the Closing Date and as of such other dates as expressly provided in this
Article III, on which the Note Issuer has relied in acquiring the Transition
Property. The representations and warranties shall survive the sale of the
Transition Property to the Note Issuer and the pledge thereof to the Note
Trustee pursuant to the Indenture.
SECTION 3.01. Organization and Good Standing. The Seller is duly
-------------------------------
organized and validly existing as a corporation in good standing under the laws
of the State of California, 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 own the Transition Property.
SECTION 3.02. Due Qualification. The Seller is duly qualified to do
------------------
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business shall require such
qualifications, licenses or approvals (except where the failure to so qualify
would not be reasonably likely to have a material adverse effect on the Seller's
9
business, operations, assets, revenues, properties or prospects).
SECTION 3.03. Power and Authority. The Seller has the requisite
--------------------
power and authority to execute and deliver this Agreement and to carry out its
terms; the Seller has full power and authority to sell and assign the Transition
Property to be sold and assigned to the Note Issuer and the Seller has duly
authorized such sale and assignment to the Note Issuer by all necessary
corporate action; and the execution, delivery and performance of this Agreement
has been duly authorized by the Seller by all necessary corporate action.
SECTION 3.04. Binding Obligation. This Agreement constitutes a
-------------------
legal, valid and binding obligation of the Seller 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.
SECTION 3.05. No Violation. After giving effect to the release of
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the lien of the [specify outstanding Indenture] on the Transition Property, the
consummation of the transactions contemplated by this Agreement and the
fulfillment of the terms hereof do not conflict with, result in any breach of
any of the terms and provisions of, nor
10
constitute (with or without notice or lapse of time) a default under, the
articles of incorporation or bylaws of the Seller, or any indenture, agreement
or other instrument to which the Seller is a party or by which it shall be
bound; nor result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement or other
instrument; nor violate any law or any order, rule or regulation applicable to
the Seller of any court or of any Federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Seller or its properties.
SECTION 3.06. No Proceedings. Except as set forth on Schedule 3.06,
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there are no proceedings or investigations pending or, to the Seller's
knowledge, threatened, before any court, Federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Seller or its properties involving or relating to the Seller or the
Note Issuer or, to the Seller's knowledge, any other Person: (i) asserting the
invalidity of this Agreement, the Indenture, the Trust Agreement or 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 Basic Documents, (iii) seeking any determination or ruling
that might materially and adversely affect the
11
performance by the Seller 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) which might
adversely affect the Federal or state income tax attributes of the Notes or the
Certificates.
SECTION 3.07. 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 Seller of this Agreement, the
performance by the Seller of the transactions contemplated hereby or the
fulfillment by the Seller of the terms hereof, except those that have been
obtained or made and those that the Seller, in its capacity as Servicer under
the Servicing Agreement, is required to make in the future pursuant to Article
IV of the Servicing Agreement.
SECTION 3.08. The Transition Property.
------------------------
(a) Information. At the Closing Date, all information provided by
------------
the Seller to the Note Issuer with respect to the Transition Property (including
the Expected Amortization Schedule, the Financing Order and the Issuance Advice
Letter) is correct in all material respects.
(b) Title. It is the intention of the parties hereto that the
------
transfer and assignment herein contemplated constitute a sale of the Transition
Property from the Seller to the Note Issuer and that the beneficial interest in
and
12
title to the Transition Property not be part of the debtor's estate in the event
of the filing of a bankruptcy petition by or against the Seller under any
bankruptcy law. No portion of the Transition Property has been sold,
transferred, assigned or pledged by the Seller to any Person other than the Note
Issuer. At the Closing Date immediately prior to the sale hereunder and after
giving effect to the release of the lien of the [describe Indenture], the Seller
owns the Transition Property, free and clear of all Liens and rights of others,
no offsets, defenses or counterclaims exist or have been asserted with respect
thereto and [Name of Utility], in its capacity as Seller or Servicer, will not
at any time assert any Lien against or with respect to any of the Transition
Property.
(c) Transfer Filings. At the Closing Date, the Transition Property
-----------------
has been validly transferred and sold to the Note Issuer, the Note Issuer shall
own all such Transition Property, free and clear of all Liens and rights of
others, except for any statutory lien under Section 843(g) of the PU Code; and
all filings to be made by the Seller (including filings with the CPUC under the
PU Code) necessary in any jurisdiction to give the Note Issuer a first priority
perfected ownership or security interest in the Transition Property have been
made (subject to any statutory lien under Section 843(g) of the PU Code). No
further action, other than any filings required by Sections 9-403(2)-(3), 9-306,
9-402(7) and 9-103 of the Uniform Commercial Code and Sections 843 and 844 of
the PU
13
Code, is required to maintain such first priority perfected ownership or
security interest (subject to any statutory lien under Section 843(g) of the PU
Code).
(d) Financing Order and Issuance Advice Letters; Other Approvals. At
-------------------------------------------------------------
the Closing Date, (i) the Financing Order and the Issuance Advice Letter have
been duly authorized and adopted by the CPUC and are in full force and effect;
(ii) as of the issuance of the Certificates, the Certificates are entitled to
the protections provided in the first sentences of Sections 841(c) and 842(d) of
the PU Code and, accordingly, the Financing Order and the Issuance Advice Letter
are not revocable by the State of California, the CPUC or the Seller; (iii) none
of the State of California, the CPUC or the Infrastructure Bank may revoke,
limit, alter or modify the FTA Charges, the Transition Property or the Financing
Order or the Advice Letters relating thereto, and all rights thereunder until
the Certificates, together with interest thereon, are fully met and discharged,
unless adequate provision shall be made by law for the protection of the
Certificateholders; (iv) the process by which the Financing Order and the
Infrastructure Bank Resolution were adopted and approved and the Issuance Advice
Letter was filed, and the Financing Order, the Issuance Advice Letter and the
Infrastructure Bank Resolution themselves, comply with all applicable laws,
rules and regulations, and there is no basis on which any Person could
successfully cause a court or other administrative body to order the revocation,
alteration,
14
limitation or other impairment of the Financing Order, the Issuance Advice
Letter, the Infrastructure Bank Resolution, the Transition Property or the FTA
Charges or any rights arising under any of them or to cause any such court or
administrative body to enjoin the performance of any obligations thereunder; and
(v) no other approval, authorization, consent, order or other action of, or
filing with, any court, Federal or state regulatory body, administrative agency
or other governmental instrumentality is required in connection with the
creation of the Transition Property, except those that have been obtained or
made.
(e) Assumptions. At the Closing Date, the assumptions used in
------------
calculating the FTA Charges related to the Transition Property are reasonable
and made in good faith.
(f) Creation of Transition Property. Upon the effectiveness of the
--------------------------------
Issuance Advice Letter: (i) all of the Transition Property constitutes a current
property right; (ii) the Transition Property includes, without limitation, (A)
the right, title and interest in and to the FTA Charges, as adjusted from time
to time, (B) the right to be paid the total amounts set forth in the Issuance
Advice Letter, (C) the right, title and interest in and to all revenues,
collections, claims, payments, money, or proceeds of or arising from the FTA
Charges set forth in the Issuance Advice Letter, and (D) all rights to obtain
adjustments to the FTA Charges pursuant to the Financing Order; and (iii)
15
the holders of the Transition Property are entitled to recover the Transition
Costs described in the Financing Order or the Issuance Advice Letter in the
aggregate amount equal to the principal amount of the Notes and the
Certificates, all interest thereon, the Overcollateralization Amount (as such
term is defined in the Servicing Agreement) relating to the Notes and all
related fees, costs and expenses in respect of the Notes and the Certificates
until they have been paid in full.
SECTION 3.09. Outstanding Indenture. On or prior to the Closing
----------------------
Date, the Lien of the [specify outstanding indenture] on the Transition Property
shall have been released.
ARTICLE IV
Covenants of the Seller
-----------------------
SECTION 4.01. Corporate Existence. So long as any of the Notes are
--------------------
outstanding, the Seller (a) will keep in full force and effect its existence,
rights and franchises as a corporation under the laws of the jurisdiction of its
incorporation and (b) will obtain and preserve its qualification to do business,
in each case to the extent that in each such jurisdiction such existence or
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the Basic Documents to which the Seller is a
party and each other instrument or agreement necessary or appropriate to the
proper administration of this Agreement and the transactions contemplated
hereby.
16
SECTION 4.02. No Liens. Except for the conveyances hereunder or any
---------
statutory lien under Section 843(g) of the PU Code, the Seller will not sell,
pledge, assign or transfer to any other Person, or grant, create, incur, assume
or suffer to exist any Lien on, any of the Transition Property, or any interest
therein, and the Seller shall defend the right, title and interest of the Note
Issuer and the Note Trustee in, to and under the Transition Property, against
all claims of third parties claiming through or under the Seller.
SECTION 4.03. Delivery of Collections. If the Seller receives
------------------------
collections in respect of the FTA Charges or the proceeds thereof, the Seller
agrees to pay the Servicer all payments received by the Seller in respect
thereof as soon as practicable after receipt thereof by the Seller, but in no
event later than two Business Days after such receipt.
SECTION 4.04. Notice of Liens. The Seller shall notify the Note
----------------
Issuer and the Note Trustee promptly after becoming aware of any Lien on any of
the Transition Property other than the conveyances hereunder or under the
Indenture or any statutory lien under Section 843(g) of the PU Code.
SECTION 4.05. Compliance with Law. The Seller hereby agrees to
--------------------
comply with its organizational or governing documents and all laws, treaties,
rules, regulations and determinations of any governmental instrumentality
applicable to the Seller, except to the extent that failure to so comply would
not adversely affect the Note Issuer's or the Note Trustee's interests in the
Transition Property or
17
under any of the Basic Documents or the Seller's performance of its obligations
hereunder or under any of the other Basic Documents to which it is party.
SECTION 4.06. Covenants Related to Transition Property.
-----------------------------------------
(a) So long as any of the Notes are outstanding, the Seller shall
treat the Notes as debt for all purposes to the extent consistent with generally
accepted accounting practices.
(b) So long as any of the Notes are outstanding, the Seller shall
indicate in its financial statements that it is not the owner of the Transition
Property.
(c) The Seller agrees that upon the sale by the Seller of the
Transition Property to the Note Issuer pursuant to this Agreement, (i) to the
fullest extent permitted by law, including applicable CPUC Regulations, the Note
Issuer shall have all of the rights originally held by the Seller with respect
to such Transition Property, including the right to exercise any and all rights
and remedies to collect any amounts payable by any Customer in respect of such
Transition Property, notwithstanding any objection or direction to the contrary
by the Seller and (ii) any payment by any Customer to the Note Issuer shall
discharge such Customer's obligations in respect of such Transition Property to
the extent of such payment, notwithstanding any objection or direction to the
contrary by the Seller.
18
(d) So long as any of the Notes are outstanding, other than for
federal and state income and franchise tax purposes, (i) the Seller shall not
make any statement or reference in respect of the Transition Property that is
inconsistent with the ownership interest of the Note Issuer, and (ii) the Seller
shall not take any action in respect of the Transition Property except solely in
its capacity as the Servicer thereof pursuant to the Servicing Agreement or as
otherwise contemplated by the Basic Documents.
SECTION 4.07. Protection of Title. The Seller shall execute and file
--------------------
such filings, including filings with the CPUC pursuant to the PU Code, and cause
to be executed and filed such filings, all in such manner and in such places as
may be required by law fully to preserve, maintain, and protect the interests of
the Note Issuer in the Transition Property, including all filings required under
the Statute relating to the transfer of the ownership or security interest in
the Transition Property by the Seller to the Note Issuer. The Seller shall
deliver (or cause to be delivered) to the Note Issuer file-stamped copies of, or
filing receipts for, any document filed as provided above, as soon as available
following such filing. [The Seller 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 the
Issuance Advice Letter.]
SECTION 4.08. Nonpetition Covenants. Notwithstanding any prior
----------------------
termination of this Agreement or the
19
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 Seller shall not, prior
to the date which is one year and one day after the termination of the
Indenture, acquiesce, petition or otherwise invoke or cause the Note Issuer or
the Trust to invoke the process of any court or government 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 4.09. Taxes. So long as any of the Notes are outstanding,
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the Seller shall, and shall cause each of its subsidiaries to, pay all material
taxes, assessments and governmental charges imposed upon it or any of its
properties or assets or with respect to any of its franchises, business, income
or property before any penalty accrues thereon; provided that no such tax need
be paid if the Seller or one of its subsidiaries is contesting the same in good
faith by appropriate proceedings promptly instituted
20
and diligently conducted and if the Seller or such subsidiary has established
appropriate reserves as shall be required in conformity with generally accepted
accounting principles.
ARTICLE V
The Seller
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SECTION 5.01. Liability of Seller; Indemnities.
---------------------------------
(a) The Seller shall be liable in accordance herewith only to the
extent of the obligations specifically undertaken by the Seller under the
Agreement.
(b) In the event of a breach by the Seller of the representations and
warranties specified in Sections 3.08(d) and 3.08(f) [others?], the Seller shall
repurchase the Transition Property from the Note Issuer at a purchase price
equal to the then outstanding principal amount of the Notes and all accrued and
unpaid interest thereon as of the repurchase date.
(c) The Seller shall indemnify 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, directors and agents for, and defend and hold harmless each such
Person from and against, any and all taxes (other than any taxes imposed on
Noteholders or Certificateholders solely as a result of their ownership of Notes
or Certificates, respectively) that may at any time be imposed on or asserted
against any such Person as a result of the sale of the Transition Property to
the Note Issuer,
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including any sales, gross receipts, general corporation, tangible personal
property, privilege or license taxes.
(d) The Seller shall indemnify 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, directors and agents for, and defend and hold harmless each such
Person from and against, any and all taxes (other than any taxes imposed on
Noteholders or Certificateholders solely as a result of their ownership of Notes
or Certificates, respectively) that may be imposed on or asserted against any
such Person under existing law as of the Closing Date as a result of the
issuance and sale by the Note Issuer of the Notes, the issuance and sale by the
Trust of the Certificates or the other transactions contemplated herein,
including any sales, gross receipts, general corporation, tangible personal
property, privilege or license taxes.
(e) The Seller shall indemnify 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, directors, 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 a result
of (i) the Seller's willful
22
misconduct, bad faith or negligence in the performance of its duties or
observance of its covenants under this Agreement, or the Seller's reckless
disregard of its obligations and duties under this Agreement or (ii) the
Seller's breach of any of its representations or warranties contained in this
Agreement.
(f) The Seller shall pay any and all taxes levied or assessed upon
all or any part of the Trust Estate based on existing law as of the Closing
Date.
(g) Indemnification under Sections 5.01(c) through 5.01(f) shall
survive the resignation or removal of the Note Trustee, the Certificate Trustee
or the Delaware Trustee and the termination of this Agreement and shall include
reasonable fees and expenses of investigation and litigation (including
attorneys fees and expenses).
SECTION 5.02. Merger or Consolidation of, or Assumption of the
------------------------------------------------
Obligations of, Seller. Any Person (a) into which the Seller may be merged or
-----------------------
consolidated, (b) which may result from any merger or consolidation to which the
Seller shall be a party or (c) which may succeed to the properties and assets of
the Seller substantially as a whole, which Person in any of the foregoing cases
executes an agreement of assumption to perform every obligation of the Seller
hereunder, shall be the successor to the Seller under this Agreement without
further act on the part of any of the parties to this Agreement; provided,
--------
however, that (i) immediately after giving effect to such transaction, no
-------
representation or warranty made pursuant to Article III
23
shall have been breached and (if the Seller is the Servicer) 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 Seller
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 Section
and that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with and (iii) the Seller 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 Seller, 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 any transaction referred to in
clauses (a), (b) or (c) above.
SECTION 5.03. Limitation on Liability of Seller and Others. The
--------------------------------- -----------
Seller and any director or officer or employee or agent of the Seller may rely
in good faith on
24
the advice of counsel or on any document of any kind, prima facie properly
executed and submitted by any Person, respecting any matters arising hereunder.
The Seller shall not be under any obligation to appear in, prosecute or defend
any legal action that shall not be incidental to its obligations under this
Agreement, and that in its opinion may involve it in any expense or liability.
ARTICLE VI
Miscellaneous Provisions
------------------------
SECTION 6.01. Amendment. The Agreement may be amended by the Seller
----------
and the Note Issuer, with the 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 from time to time by the Seller and
the Note Issuer, with the consent of the Note Trustee and the 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
25
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Noteholders or the Certificateholders; provided,
--------
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 or consent, the
Note Issuer shall furnish written notification of the substance of such
amendment or consent 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 the execution of any amendment to this Agreement, the Note
Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating
that the execution of such amendment is authorized or permitted by this
Agreement. 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 6.02. Notices. All demands, notices and communications upon
--------
or to the Seller, the Note Issuer, the
26
Note Trustee or the Rating Agencies under this Agreement shall be in writing,
personally delivered, 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 Seller, 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 [_], [_], 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) as to each of the foregoing, at such other address as shall be
designated by written notice to the other parties.
SECTION 6.03. Assignment. Notwithstanding anything to the contrary
-----------
contained herein, except as pro-
27
vided in Section 5.02, this Agreement may not be assigned by the Seller.
SECTION 6.04. Limitations on Rights of Others. The provisions of
--------------------------------
this Agreement are solely for the benefit of the Seller, the Note Issuer, the
Note Trustee, the Trust, the Certificate Trustee, the Delaware Trustee, the
Infrastructure Bank, the Noteholders and the Certificateholders and nothing in
this Agreement, whether express or implied, shall be construed to give to any
other Person any legal or equitable right, remedy or claim in the Transition
Property or under or in respect of this Agreement or any covenants, conditions
or provisions contained herein.
SECTION 6.05. Severability. Any provision of this Agreement that is
-------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 6.06. Separate Counterparts. This Agreement may be executed
----------------------
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 6.07. Headings. The headings of the various Articles and
---------
Sections herein are for convenience of
28
reference only and shall not define or limit any of the terms or provisions
hereof.
SECTION 6.08. Governing Law. This Agreement shall be construed in
--------------
accordance with the laws of the 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 6.09. Assignment to Note Trustee. The Seller hereby
---------------------------
acknowledges and consents to any mortgage, pledge, assignment and grant of a
security interest by the Note Issuer to the Note Trustee pursuant to the
Indenture for the benefit of the Noteholders of all right, title and interest of
the Note Issuer in, to and under the Transition Property and the proceeds
thereof and the assignment of any or all of the Note Issuer's rights and
obligations hereunder to the Note Trustee.
29
SECTION 6.10. Limitation of Liability. It is expressly understood
------------------------
and agreed by the parties hereto that (a) this Agreement is executed and
delivered by Bankers 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
30
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], Note Issuer,
by
___________________________________
Title:
[NAME OF UTILITY], Seller,
by
___________________________________
Title:
Acknowledged and Accepted:
BANKERS TRUST COMPANY, not
in its individual capacity
but solely as Note Trustee,
by
____________________
