EXHIBIT 10.2
TRANSITION PROPERTY SERVICING AGREEMENT
between
RELIANT ENERGY TRANSITION BOND COMPANY LLC
Issuer
and
RELIANT ENERGY, INCORPORATED
Servicer
Dated as of _______________, 2001
TABLE OF CONTENTS
ARTICLE I DEFINITIONS....................................................................... 1
SECTION 1.01. DEFINITIONS.................................................................. 1
SECTION 1.02. OTHER DEFINITIONAL PROVISIONS................................................ 1
ARTICLE II APPOINTMENT AND AUTHORIZATION OF SERVICER........................................ 2
SECTION 2.01. APPOINTMENT OF SERVICER; ACCEPTANCE OF APPOINTMENT........................... 2
SECTION 2.02. AUTHORIZATION................................................................ 2
SECTION 2.03. DOMINION AND CONTROL OVER TRANSITION PROPERTY................................ 2
ARTICLE III BILLING SERVICES................................................................ 3
SECTION 3.01. DUTIES OF SERVICER........................................................... 3
SECTION 3.02. COLLECTION AND ALLOCATION OF TRANSITION CHARGES.............................. 4
SECTION 3.03. PAYMENT OF TC COLLECTIONS.................................................... 5
SECTION 3.04. SERVICING AND MAINTENANCE STANDARDS.......................................... 7
SECTION 3.05. SERVICER'S CERTIFICATES...................................................... 8
SECTION 3.06. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF DEFAULT......................... 8
SECTION 3.07. ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT...................... 8
SECTION 3.08. TRANSITION PROPERTY DOCUMENTATION............................................ 9
SECTION 3.09. COMPUTER RECORDS; AUDITS OF DOCUMENTATION.................................... 9
SECTION 3.10. DEFENDING TRANSITION PROPERTY AGAINST CLAIMS................................. 10
SECTION 3.11. OPINIONS OF COUNSEL.......................................................... 10
ARTICLE IV SERVICES RELATED TO TRANSITION CHARGES ADJUSTMENTS............................... 11
SECTION 4.01. TRANSITION CHARGE ADJUSTMENTS AND RAAF ADJUSTMENTS........................... 11
ARTICLE V THE SERVICER...................................................................... 11
SECTION 5.01. REPRESENTATIONS AND WARRANTIES OF SERVICER................................... 11
SECTION 5.02. INDEMNITIES OF SERVICER; RELEASE OF CLAIMS................................... 13
SECTION 5.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, SERVICER.... 15
SECTION 5.04. ASSIGNMENT OF SERVICER'S OBLIGATIONS......................................... 16
SECTION 5.05. LIMITATION ON LIABILITY OF SERVICER AND OTHERS............................... 17
SECTION 5.06. RELIANT ENERGY NOT TO RESIGN AS SERVICER..................................... 17
SECTION 5.07. SERVICING FEE................................................................ 17
SECTION 5.08. SERVICER EXPENSES............................................................ 18
SECTION 5.09. APPOINTMENTS................................................................. 18
SECTION 5.10. NO SERVICER ADVANCES......................................................... 18
SECTION 5.11. REMITTANCES.................................................................. 18
SECTION 5.12. PROTECTION OF TITLE.......................................................... 19
ARTICLE VI SERVICER DEFAULT................................................................. 19
SECTION 6.01. SERVICER DEFAULT............................................................. 19
SECTION 6.02. NOTICE OF SERVICER DEFAULT................................................... 21
SECTION 6.03. WAIVER OF PAST DEFAULTS...................................................... 21
SECTION 6.04. APPOINTMENT OF SUCCESSOR..................................................... 21
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SECTION 6.05. COOPERATION WITH SUCCESSOR................................................... 22
ARTICLE VII MISCELLANEOUS PROVISIONS........................................................ 22
SECTION 7.01. AMENDMENT.................................................................... 22
SECTION 7.02. NOTICES...................................................................... 22
SECTION 7.03. ASSIGNMENT................................................................... 23
SECTION 7.04. LIMITATIONS ON RIGHTS OF OTHERS.............................................. 23
SECTION 7.05. SEVERABILITY................................................................. 23
SECTION 7.06. SEPARATE COUNTERPARTS........................................................ 23
SECTION 7.07. HEADINGS..................................................................... 23
SECTION 7.08. GOVERNING LAW................................................................ 23
SECTION 7.09. ASSIGNMENT TO THE TRUSTEE.................................................... 23
SECTION 7.10. NONPETITION COVENANTS........................................................ 24
SECTION 7.11. TERMINATION.................................................................. 24
SECTION 7.12. INTERCREDITOR AGREEMENT...................................................... 24
ANNEX 1 TO SERVICING AGREEMENT
APPENDIX A - MASTER DEFINITIONS
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TRANSITION PROPERTY SERVICING AGREEMENT dated as of _________________, 2001
(this "Agreement") between RELIANT ENERGY TRANSITION BOND COMPANY LLC, a
Delaware limited liability company (the "Issuer"), and RELIANT ENERGY,
INCORPORATED, a Texas corporation ("Reliant Energy"), as the servicer of the
Transition Property hereunder (together with each successor to Reliant Energy in
such capacity pursuant to Section 5.03 or 6.04, the "Servicer").
WHEREAS the Servicer is willing to service the Transition Property
purchased from the Seller by the Issuer;
WHEREAS the Issuer, in connection with ownership of the Transition
Property, desires to engage the Servicer to carry out the functions described
herein;
WHEREAS, the Texas Electric Choice Plan allows for customer choice in the
selection of electric-service providers beginning in January 2002, (the first
date of such customer choice to be referred to as "Choice");
WHEREAS, the Texas Electric Choice Plan allows for customer choice in the
selection of electric-service providers during a pilot program that may begin
before January 2002 (the "Pilot Program") and during which time both Reliant
Energy and certain REPs may provide electric service to various Customers;
WHEREAS, the Transition Charges may not be itemized on Customers' bills and
the TC Collections initially will be commingled with other funds collected from
Customers and REPs (as applicable);
WHEREAS, a number of parties may have an interest in such commingled
collections, and such parties have entered into an Intercreditor Agreement as of
the date hereof that allows the party acting as both the Servicer and the
Receivables Servicer to allocate the collected, commingled funds according to
each interested party's interest;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. Capitalized terms used but not otherwise defined
in this Agreement have the respective meanings set forth in Appendix A hereto.
SECTION 1.02. OTHER DEFINITIONAL PROVISIONS.
(a) The words "hereof", "herein", "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement; Section, Annex,
Schedule and Exhibit references contained in this Agreement are references
to Sections, Annexes, Schedules and Exhibits in or to this Agreement unless
otherwise specified; and the term "including" shall mean "including without
limitation."
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(b) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms.
(c) All terms defined in this Agreement have the defined meanings when
used in any certificate or other document made or delivered pursuant to
this Agreement unless otherwise defined therein.
ARTICLE II
APPOINTMENT AND AUTHORIZATION OF SERVICER
SECTION 2.01. APPOINTMENT OF SERVICER; ACCEPTANCE OF APPOINTMENT.
Subject to Section 5.04, Section 5.06 and Article VI, the Issuer hereby appoints
the Servicer, and the Servicer hereby accepts such appointment, to perform the
Servicer's obligations pursuant to this Agreement on behalf of and for the
benefit of the Issuer in accordance with the terms of this Agreement. This
appointment and the Servicer's acceptance thereof may not be revoked except in
accordance with the express terms of this Agreement.
SECTION 2.02. AUTHORIZATION. With respect to all or any portion of the
Transition Property, the Servicer shall be, and hereby is, authorized and
empowered by the Issuer to:
(a) execute and deliver, on behalf of itself or the Issuer, as the case
may be, any and all instruments, documents or notices, and
(b) on behalf of itself or the Issuer, as the case may be, make any
filing and participate in Proceedings related to the duties of the Servicer
hereunder with any governmental authorities, including with the PUCT.
The Issuer shall furnish the Servicer with such documents as have been
prepared by the Servicer for execution by the Issuer, and with such other
documents as may be in the Issuer's possession, 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 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 TRANSITION PROPERTY.
Notwithstanding any other provision contained herein, the Servicer and the
Issuer agree that the 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 of the Issuer with respect to the Transition
Property. The Servicer hereby agrees that it shall not take any action that is
not authorized by this Agreement, the Texas Electric Choice Plan or the
Financing Order, that is not consistent with its customary procedures and
practices, or that shall impair the rights of the Issuer with respect to the
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
SECTION 3.01. DUTIES OF SERVICER. The Servicer, as agent for the Issuer (to
the extent provided herein), shall have the following duties:
(a) Duties of Servicer Generally. The Servicer shall manage, service,
administer and make collections in respect of the Transition Property. The
Servicer's duties will include:
(i) obtaining meter reads and providing such metering information to
the REPs, as applicable (unless another entity assumes metering
responsibilities in accordance with the Financing Order, applicable
tariffs or the Texas Electric Choice Plan);
(ii) calculating and billing the Transition Charges;
(iii) collecting payments of Transition Charges and payments with
respect to Transition Property from all persons or entities responsible
for remitting Transition Charges and other payments with respect to
Transition Property to the Servicer under the Financing Order, the Texas
Electric Choice Plan, PUCT Regulations or applicable tariffs; provided,
however, the Issuer and the Servicer acknowledge and agree that pursuant
to the Intercreditor Agreement, payments in respect of Transition
Charges and Transition Property may be deposited initially into an
account held and processed by Reliant Energy in its individual capacity
for the benefit of the Servicer, and that Reliant Energy in its
individual capacity may be replaced as the holder of such account by a
Replacement Servicer or Designated Account Holder as those terms are
defined and as set forth more fully in the Intercreditor Agreement;
(iv) posting all TC Collections remitted to the Servicer and posting
all late-payment penalties assessed against REPs (as described in
Section 3.02);
(v) responding to inquiries by Customers, REPs, the PUCT or any
other State, local or federal governmental authority with respect to the
Transition Property and the Transition Charges;
(vi) accounting for TC Collections and late-payment penalties of
REPs, investigating and resolving delinquencies (including, where
permitted by the Financing Order, Tariff TC and/or PUCT Regulations,
terminating transmission and distribution service for nonpayment of
charges), processing and depositing collections, making periodic
remittances to the Trustee and furnishing periodic reports to the
Issuer, the Trustee and each Rating Agency;
(vii) providing certified calculations and other information
reasonably requested by any party to the Intercreditor Agreement to
allow such party to perform its duties properly under the Intercreditor
Agreement and monitoring collections, allocations and remittances of
funds for compliance with the Intercreditor Agreement;
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(viii) providing information reasonably requested by Reliant Energy
in connection with the allocation of collections between Transition
Charges and Transition Property on one hand, and other charges and fees
on the other;
(ix) monitoring payments by each REP, reviewing any financial
reports provided by each REP and monitoring compliance by each REP with
the credit standards and deposit obligations set forth in the Financing
Order;
(x) notifying each REP of any defaults by such REP in its payment
obligations and other obligations under Tariff TC, and enforcing against
such REP at the earliest date permitted by the Financing Order and
Tariff TC any remedies provided by such Tariff TC, the Financing Order
or other applicable law;
(xi) selling, as the agent for the Issuer, as its interest may
appear, defaulted or written off accounts in accordance with the
Servicer's usual and customary practices;
(xii) taking action in connection with Transition Charge Adjustments
and RAAF Adjustments as is set forth herein; and
(xiii) any other duties specified for a servicer under the Financing
Order, Tariff TC, the Texas Electric Choice Plan or other applicable
law.
Anything to the contrary notwithstanding, the duties of the Servicer set
forth in this Agreement shall be qualified in their entirety by, and the
Servicer shall at all times comply with, the Financing Order, the Texas
Utilities Code and any PUCT Regulations, orders or directions as in effect at
the time such duties are to be performed. Without limiting the generality of
this Section 3.01(a), in furtherance of the foregoing, the Servicer hereby
agrees that it shall also have, and shall comply with, the duties and
responsibilities relating to data acquisition, usage and xxxx calculation,
billing, customer service functions, collections, payment processing and
remittance set forth in Exhibit A hereto.
(b) Notification of Laws and Regulations. The Servicer shall immediately
notify the Issuer, the Trustee and each Rating Agency in writing of any
laws or PUCT Regulations, orders or directions hereafter promulgated that
have a material adverse effect on the Servicer's ability to perform its
duties under this Agreement.
(c) Other Information. Upon the reasonable request of the Issuer, the
Trustee or any Rating Agency, the Servicer shall provide to the Issuer, the
Trustee or such Rating Agency, as the case may be, any public financial
information in respect of the Servicer, or any material information
regarding the Transition Property to the extent it is reasonably available
to the Servicer, that may be reasonably necessary and permitted by law for
the Issuer, the Trustee or the Rating Agency to monitor the performance by
the Servicer hereunder. In addition, so long as any of the Transition Bonds
of any Series are Outstanding, the Servicer shall provide to the Issuer and
to the Trustee, within a reasonable time after written request therefor,
any information available to the Servicer or reasonably obtainable by it
that is necessary to calculate the Transition Charges applicable to each
Customer Class.
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SECTION 3.02. COLLECTION AND ALLOCATION OF TRANSITION CHARGES.
(a) The Servicer shall use all reasonable efforts, consistent with its
customary servicing procedures, to collect all amounts owed in respect of
Transition Charges and late-payment penalties (as set forth in Section
3.02(c) below) as and when the same shall become due and shall follow such
collection procedures as it follows with respect to collection activities
that the Servicer conducts for itself or others. The Servicer shall not
change the amount of or reschedule the due date of any scheduled payment of
Transition Charges, except as contemplated in this Agreement or as required
by law or court or PUCT order or directive. The Servicer shall enforce at
the earliest possible date the obligations with respect to the Transition
Charges of each REP and each other Person owing or collecting Transition
Charges, provided that any REP shall be entitled to hold back from its
payment of Transition Charges to the Servicer an allowance for charge-offs
according to the procedure and calculations set forth in the Financing
Order, Tariff TC and the Issuer Annex.
(b) Any amounts received into a lockbox or equivalent account controlled
by the Servicer in the event of a default by an REP (as defined in the
Financing Order and Tariff TC) that represent a partial payment toward an
outstanding customer balance will be allocated first to Transition Charges
and, second, pro rata to other fees and charges, as specified in Tariff TC
and Finding of Fact No. 50(e)(3) in the Financing Order. Other than as
described in the preceding sentence, if a Customer or REP pays only a
portion of its xxxx, a pro rata portion of Transition Charge revenues shall
be deemed to be collected, and any shortfall will be allocated, first,
ratably based on the amount owed for Transition Charges and the amount owed
for other fees and charges, other than late charges, owed to Reliant Energy
or any purchaser of the Transition Property as successor in interest to
Reliant Energy and, second, all late charges shall be allocated to Reliant
Energy or any purchaser of the Transition Property as successor in interest
to Reliant Energy.
(c) If an REP fails to remit payment in full of all Transition Charges
billed to such REP by the day that is 35 calendar days after the date on
which the Transition Charges were billed to the REP ("REP Billing Day"),
the Servicer shall assess and collect a late-payment penalty (the
"Penalty") from such REP on the 36th day following the REP Billing Day (the
"Penalty Assessment Day"). The amount of such late-payment penalty shall be
5% of the amount of TC Collections that were billed on the REP Billing Day
and not paid on or before the calendar day immediately preceding the
Penalty Assessment Day. All amounts collected in respect of Penalties shall
be paid to the Trustee for deposit in the Collection Account and shall be
applied against Transition Bond obligations. Disputes regarding whether and
when an REP has made payment of billed Transition Charges shall be resolved
in accordance with Section 8(b) of the Issuer Annex.
SECTION 3.03. PAYMENT OF TC COLLECTIONS.
(a) The Servicer shall prepare and deliver at Closing a Collections
Curve for collections arising from bills sent during each Billing Month
that is to occur from and including the Billing Month in which Closing
occurs through and including the Billing Month that includes the beginning
of Choice, inclusive (each such month, a "Pre-Choice Billing Month").
(b) Prior to Choice and through the Billing Month that is eight months
after Choice but excluding any TC Collections with respect to any Pilot
Program,
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(i) The Servicer agrees to remit actual TC Collections received by
the Servicer with respect to any Pre-Choice Billing Month to the Trustee
for deposit in the Collection Account not later than the Remittance Date
immediately following the Reconciliation Date for such Pre-Choice
Billing Month. In addition, the Servicer shall make periodic payments on
account of TC Collections with respect to each Pre-Choice Billing Month
to the Trustee for deposit in the Collection Account as follows:
(A) On each Monthly Remittance Date, for so long as the Servicer
is in satisfaction of the conditions of Section 5.11(b), the
Servicer shall remit to the Trustee with respect to each Pre-Choice
Billing Month the amount of TC Collections estimated to have been
received by the Servicer from Customers during the calendar month
immediately preceding the Current Remittance Month, based on the
applicable Collections Curve then in effect for the Customer
Classes, for the Pre-Choice Billing Months. For purposes of the
foregoing, no TC Collections shall be deemed to have been received
in the Current Remittance Month with respect to any Pre-Choice
Billing Month that is more than seven months prior to the Current
Remittance Month.
(B) On each Daily Remittance Date, for so long as the Servicer
is not in satisfaction of the conditions of Section 5.11(b), the
Servicer shall remit to the Trustee with respect to the Pre-Choice
Billing Months the amount of TC Collections estimated to have been
received by the Servicer from Customers during the Business Day that
is two Business Days preceding such Daily Remittance Date with
respect to the Pre-Choice Billing Months, including any amounts on
deposit with the Servicer prior to such Daily Remittance Date during
a period when the Servicer had been remitting on a Monthly
Remittance Date, provided that for each such Pre-Choice Billing
Month, such estimate shall be made by dividing (1) the amount of TC
Collections estimated to be received from Customers during the
Current Remittance Month, based on the applicable Collections Curve
then in effect, for each of the Pre-Choice Billing Months divided by
(2) the number of Business Days in the Current Remittance Month.
(ii) On or before the Reconciliation Date for each Pre-Choice
Billing Month, the Servicer shall determine whether there exists a Curve
Payment Shortfall or an Excess Curve Payment with respect to such
Billing Month by comparing the actual TC Collections of the Servicer
with respect to such Billing Month to the Collections Curve Payments
previously made by the Servicer to the Trustee in respect of such
Billing Month. In the event there is a Curve Payment Shortfall with
respect to such Billing Month, the Servicer shall pay the Curve Payment
Shortfall to the Trustee for deposit into the Collection Account on that
Reconciliation Date. In the event that there is an Excess Curve Payment
for the applicable Billing Month, the Servicer may (i) reduce the amount
that the Servicer is required to remit to the Trustee for deposit in the
Collection Account on the corresponding Remittance Date (and, if
necessary, succeeding Remittance Dates) by the amount of the Excess
Curve Payment upon written notice to the Trustee, or (ii) require the
Trustee by written direction to pay to the Servicer from the Collection
Account the amount of the Excess Curve Payment, which payment shall
become the property of the Servicer.
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(c) During any Pilot Program (with respect to TC Collections
attributable to such Pilot Program) and beginning with Choice,
(i) the Servicer shall collect and remit to the Trustee for deposit
in the Collection Account on a daily basis the Transition Charges in
accordance with Section 3.02 upon receipt of such collection from any
source; provided that
(ii) the Servicer shall follow the procedure for making payments of
actual TC Collections and TC Collections on account to the Trustee as set
forth in Section 3.03(b) for the time period set forth therein in respect
of Transition Charges collected by the Servicer from (A) Customers and
others required to pay Transition Charges who are not receiving electric
service from an REP during any Pilot Program and (B) Customers and others
required to pay Transition Charges who are receiving electric service from
an REP during any Pilot Program or beginning with Choice but maintain
outstanding balances of Transition Charges and/or other charges and fees
from the period prior to such Pilot Program or Choice, which outstanding
balances are billed and collected by an entity other than such REP.
(d) The Servicer agrees and acknowledges that it will hold all TC
Collections and other Transition Property collected by it for the benefit of
the Issuer and the Trustee and that all amounts will be remitted by the
Servicer in accordance with this Agreement without any surcharge, fee, offset,
charge or other deduction other than as expressly permitted in this Agreement
and without making any claim to reduce its obligation to remit all TC
Collections and any other proceeds of the Transition Property collected by it.
SECTION 3.04. SERVICING AND MAINTENANCE STANDARDS. The Servicer shall, on
behalf of the Issuer:
(a) manage, service, administer and make collections in respect of the
Transition Charges with reasonable care and in material compliance with
applicable law, including all applicable PUCT Regulations and guidelines,
using the same degree of care and diligence that the Servicer exercises
with respect to billing and collection activities that the Servicer
conducts for itself and others;
(b) follow standards, policies and procedures in performing its duties
as Servicer that are customary in the electric transmission and
distribution industry or that the PUCT has mandated and consistent with the
terms and provisions of the Financing Order, Tariff TC and existing law;
(c) use all reasonable efforts, consistent with its customary servicing
procedures, to enforce and maintain the Issuer's and the Trustee's rights
in respect of the Transition Property;
(d) calculate Transition Charges and RAAFs in compliance with the Texas
Electric Choice Plan, the Financing Order, any PUCT order related to
Transition Charge allocation and any applicable tariffs;
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(e) provide all reports to such parties to the Intercreditor Agreement
regarding the Transition Charges and RAAFs as are necessary to effect
collection, allocation and remittance of payments in respect of Transition
Charges and other collected funds in accordance with this Agreement and the
Intercreditor Agreement; and
(f) file continuation statements required under the Texas Electric
Choice Plan or the UCC to maintain the perfected security interest of the
Trustee in the Trust Estate and use all reasonable efforts to otherwise
enforce and maintain the Trustee's rights in respect of the Transition
Property and the Trust Estate;
except where the failure to comply with any of the foregoing would not
materially and adversely affect the Issuer's or the Trustee's interest in
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 pursuant to
Section 3.10 hereof or otherwise.
SECTION 3.05. SERVICER'S CERTIFICATES. The Servicer shall provide to the
Issuer and the Trustee the statements and certificates specified in the Issuer
Annex at the time and in the manner set forth therein.
SECTION 3.06. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF DEFAULT.
(a) The Servicer shall deliver to the Issuer, to the Trustee and to each
Rating Agency, on or before March 31 of each year beginning March 31, 2002,
an Officers' Certificate, stating that:
(i) a review of the activities of the Servicer during the preceding
calendar year (or relevant portion thereof) and of its performance under
this Agreement has been made under such officers' supervision and
(ii) to the best of such officers' knowledge, based on such review,
the Servicer has fulfilled all its obligations under this Agreement
throughout such period or, if there has been a default in the
fulfillment of any such obligation, describing each such default.
SECTION 3.07. ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT.
(a) The Servicer shall cause a firm of independent certified public
accountants (which may also provide other services to the Servicer or the
Seller) to prepare, and the Servicer shall deliver to the Issuer, to the
Trustee and to each Rating Agency, on or before March 31 of each year,
beginning March 31, 2002, to and including the March 31 succeeding the
retirement of all Transition Bonds, a report addressed to the Servicer (the
"Annual Accountant's Report"), which may be included as part of the
Servicer's customary auditing activities, to the effect that such firm has
performed certain procedures related to financial matters in connection
with the Servicer's compliance with its obligations under this Agreement
during the preceding calendar year (or, in the case of the first Annual
Accountant's Report, the period of time from the first Sale Date through
December 31, 2001), identifying the results of such procedures and
including
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any exceptions noted. In the event such accounting firm requires the
Trustee or the Issuer to agree or consent to the procedures performed by
such firm, the Issuer shall direct the Trustee in writing to so agree; it
being understood and agreed that the Trustee shall deliver such letter of
agreement or consent in conclusive reliance upon the direction of the
Issuer, and the Trustee shall not make any independent inquiry or
investigation as to, and shall have no obligation or liability in respect
of, the sufficiency, validity or correctness of such procedures.
(b) The Annual Accountant's Report shall also indicate that the
accounting firm providing such report is independent of the Servicer within
the meaning of the Code of Professional Ethics of the American Institute of
Certified Public Accountants.
SECTION 3.08. TRANSITION PROPERTY DOCUMENTATION. To assure uniform quality
in servicing the Transition Property and to reduce administrative costs, the
Servicer shall keep on file, in accordance with its customary procedures, all
Transition Property Documentation, it being understood that the Servicer is
acting only as the servicing agent and custodian for the Issuer with respect to
the Transition Property Documentation.
SECTION 3.09. COMPUTER RECORDS; AUDITS OF DOCUMENTATION.
(a) Safekeeping. The Servicer shall maintain accurate and complete
accounts, records and computer systems pertaining to the Transition
Property and the Transition Property Documentation in accordance with its
standard accounting procedures and in sufficient detail to permit
reconciliation between payments or recoveries on (or with respect to)
Transition Charges and the TC Collections from time to time remitted to the
Trustee pursuant to Section 5.11 and to enable the Issuer to comply with
this Agreement and the Indenture. The Servicer shall conduct, or cause to
be conducted, periodic audits of the Transition Property Documentation held
by it under this Agreement and of the related accounts, records and
computer systems, in such a manner as shall enable the Issuer and the
Trustee, as pledgee of the Issuer, to verify the accuracy of the Servicer's
record keeping. The Servicer shall promptly report to the Issuer and to the
Trustee any failure on the Servicer's part to hold the Transition Property
Documentation and maintain its accounts, records and computer systems as
herein provided and promptly take appropriate action to remedy any such
failure. Nothing herein shall be deemed to require an initial review or any
periodic review by the Issuer or the Trustee of the Transition Property
Documentation. The Servicer's duties to hold the Transition Property
Documentation on behalf of the Issuer set forth in this Section 3.09, to
the extent such Transition Property Documentation has not been previously
transferred to a successor Servicer, shall terminate three years after the
earlier of the date on which (i) the Servicer is succeeded by a successor
Servicer pursuant to the provisions of this Agreement or (ii) no Transition
Bonds of any Series are outstanding.
(b) Maintenance of and Access to Records. The Servicer shall maintain
the Transition Property Documentation at 0000 Xxxxxxxxx Xxxxxx, Xxxxxxx,
Xxxxx or at such other office as shall be specified to the Issuer and to
the Trustee by written notice not later than 30 days prior to any change in
location. The Servicer shall permit the Issuer and the Trustee or their
respective duly authorized representatives, attorneys, agents or auditors
at any time during normal business hours to inspect, audit and make copies
of and abstracts from the Servicer's records regarding the Transition
Property, the Transition Charges and the Transition Property Documentation.
The failure of the Servicer to provide access to such information as a
result of an
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obligation or applicable law (including PUCT Regulations) prohibiting
disclosure of information regarding customers shall not constitute a breach
of this Section 3.09(b).
(c) Release of Documents. Upon written instruction from the Trustee in
accordance with the Indenture, the Servicer shall release any Transition
Property Documentation to the Trustee, the Trustee's agent or the Trustee's
designee, as the case may be, at such place or places as the Trustee may
designate, as soon as practicable.
SECTION 3.10. DEFENDING TRANSITION PROPERTY AGAINST CLAIMS. The Servicer
shall institute any action or Proceeding necessary to compel performance by the
PUCT, the State of Texas, each REP and each party to the Intercreditor Agreement
(and in the case of each REP at the earliest possible time) of any of their
obligations or duties under the Texas Electric Choice Plan, the Financing Order
or the Intercreditor Agreement with respect to the Transition Property, and the
Servicer agrees to take such legal or administrative actions, including
defending against or instituting and pursuing legal actions and appearing or
testifying at hearings or similar proceedings as may be reasonably necessary to
block or overturn any attempts to cause a repeal of, modification of, or
supplement to, the Texas Electric Choice Plan or the Financing Order. The costs
of any such action shall be payable from TC Collections as an Operating Expense
in accordance with the Indenture. The Servicer's obligations pursuant to this
Section 3.10 shall survive and continue notwithstanding the fact that the
payment of Operating Expenses pursuant to the Indenture may be delayed (it being
understood that the Servicer may be required initially to advance its own funds
to satisfy its obligations hereunder).
SECTION 3.11. OPINIONS OF COUNSEL. The Servicer shall deliver to the Issuer
and to the Trustee:
(a) promptly after the execution and delivery of this Agreement and of
each amendment hereto, promptly after the execution of the Sale Agreement
and of each amendment thereto, and on each Sale Date, an Opinion of Counsel
either:
(i) to the effect that, in the opinion of such counsel, all filings,
including filings with the Secretary of State of the State of Texas
pursuant to the Texas Electric Choice Plan and filings pursuant to the
UCC, that are necessary to fully preserve and protect the interests of
each of the Issuer and the Trustee in the Transition Property have been
executed and filed and are in full force and effect, and reciting the
details of such filings or referring to prior Opinions of Counsel in
which such details are given, or
(ii) to the effect that, in the opinion of such counsel, no such
action shall be necessary to preserve and protect such interests; and
(b) within 90 days after the beginning of each calendar year beginning
with the first calendar year beginning more than three months after the
first Sale Date, an Opinion of Counsel, dated as of a date during such 90-
day period, either:
(i) to the effect that, in the opinion of such counsel, all filings,
including filings with the Secretary of State of the State of Texas
pursuant to the Texas Electric Choice Plan and filings pursuant to the
UCC, that are necessary to fully preserve and protect the interests of
each of the Issuer and the Trustee in the Transition Property have
10
been executed and filed and are in full force and effect, and reciting
the details of such filings or referring to prior Opinions of Counsel in
which such details are given, or
(ii) to the effect that, in the opinion of such counsel, no such
action shall be necessary to preserve and protect such interest.
Each Opinion of Counsel referred to in clause (a) or (b) above shall specify any
action necessary (as of the date of such opinion) to be taken in the following
year to preserve and protect such interests.
ARTICLE IV
SERVICES RELATED TO TRANSITION CHARGES ADJUSTMENTS
AND RAAF ADJUSTMENTS
SECTION 4.01. TRANSITION CHARGE ADJUSTMENTS AND RAAF ADJUSTMENTS. The
Servicer shall perform the calculations and take the actions relating to
adjusting the Transition Charges and RAAFs as set forth in the Issuer Annex at
the time and in the manner set forth therein.
ARTICLE V
THE SERVICER
SECTION 5.01. REPRESENTATIONS AND WARRANTIES OF SERVICER. The Servicer
makes the following representations and warranties as of each Sale Date, on
which the Issuer has relied and will rely in acquiring Transition Property. The
representations and warranties shall survive the execution and delivery of this
Agreement, the sale of any of the Transition Property to the Issuer and the
pledge thereof to the Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer is a corporation duly
organized and in good standing under the laws of the state of its
incorporation, with the corporate power and authority to own its properties
and to conduct its business as such properties are currently owned and such
business is presently conducted and to execute, deliver and carry out the
terms of this Agreement and has the power, authority and legal right to
service the Transition Property.
(b) Due Qualification. The Servicer is duly qualified to do business as
a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business (including the servicing
of the Transition Property as required by this Agreement) requires such
qualifications, licenses or approvals (except where the failure to so
qualify would not be reasonably likely to have a material adverse effect on
the Servicer's business, operations, assets, revenues, properties or
prospects or adversely affect the servicing of the Transition Property).
(c) Power and Authority. The Servicer has the corporate power and
authority to execute and deliver this Agreement and to carry out the terms
hereof; and the execution,
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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 against the Servicer in
accordance with its terms subject to bankruptcy, receivership, insolvency,
reorganization, moratorium or other laws affecting creditors' rights
generally from time to time in effect and to general principles of equity
(regardless of whether considered in a Proceeding in equity or at law).
(e) No Violation. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof will not conflict
with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under, the
articles of incorporation or by-laws of the Servicer, or any indenture,
agreement or other instrument to which the Servicer is a party or by which
it is bound or result in the creation or imposition of any Lien upon any of
its properties pursuant to the terms of any such indenture, agreement or
other instrument; or violate any law or any order, rule or regulation
applicable to the Servicer of any court or of any federal or State
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or its properties.
(f) Approvals. Except for the Issuance Advice Letter, filings with the
PUCT for adjusting Transition Charges and RAAFs pursuant to Section 4.01
and the Issuer Annex and continuation filings with the Secretary of State
of the State of Texas under Article 9 of the UCC, 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
or that are required by this Agreement to be made in the future by the
Servicer.
(g) No Proceedings. There are no Proceedings or investigations pending
or, to the Servicer's best knowledge, threatened before any court, federal
or State regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or its properties:
(i) seeking any determination or ruling that might materially and
adversely affect the Transition Property or the performance by the
Servicer of its obligations under, or the validity or enforceability
against the Servicer of, this Agreement, except as disclosed by the
Servicer to the Issuer;
(ii) relating to the Servicer and which might materially and
adversely affect the federal or State income, gross receipts or
franchise tax attributes of the Transition Property or the Transition
Bonds; or
(iii) seeking to prevent the issuance of the Transition Bonds or the
consummation of any of the transactions contemplated by this Agreement
or any of the other Basic Documents.
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(h) Reports and Certificates. Each report and certificate delivered in
connection with any filing made to the PUCT by the Servicer on behalf of
the Issuer with respect to Transition Charges, Transition Charge
Adjustments or RAAF Adjustments will constitute a representation and
warranty by the Servicer that each such report or certificate, as the case
may be, is true and correct in all material respects; provided, however,
that to the extent any such report or certificate is based in part upon or
contains assumptions, forecasts or other predictions of future events, the
representation and warranty of the Servicer with respect thereto will be
limited to the representation and warranty that such assumptions, forecasts
or other predictions of future events are reasonable based upon historical
performance.
(i) Conversion. The conversion of Reliant Energy into a Texas limited
liability company will not:
(i) interrupt Reliant Energy's existence;
(ii) affect Reliant Energy's rights, title and interests in its real
estate and other property or its power and authority to perform its
obligations under the Sale Agreement, this Agreement or the other Basic
Documents; or
(iii) impair or diminish the liabilities and obligations of Reliant
Energy, including, without limitation, its obligations under this
Agreement or any other Basic Document.
SECTION 5.02. INDEMNITIES OF SERVICER; RELEASE OF CLAIMS.
(a) The Servicer shall be liable in accordance herewith only to the
extent of the obligations specifically undertaken by the Servicer under
this Agreement and the Intercreditor Agreement.
(b) The Servicer shall indemnify the Issuer and the Trustee (for itself
and on behalf of the Transition Bondholders) and each of their respective
trustees, members, managers, officers, directors, employees and agents for,
and defend and hold harmless each such Person from and against, any and all
Losses that may be imposed upon, incurred by or asserted against any such
Person as a result of:
(i) the Servicer's willful misconduct, bad faith or 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;
(ii) the Servicer's breach of any of its representations or
warranties in this Agreement; or
(iii) litigation and related expenses relating to its status and
obligations as Servicer (other than any proceedings the Servicer is
required to institute under this Agreement);
provided, however, that the Servicer shall not be liable for any Losses
resulting from the willful misconduct or gross negligence of any Person
indemnified pursuant to this Section 5.02 (each, an
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"Indemnified Person") or resulting from a breach of a representation or warranty
made by such Indemnified Person to the Servicer in any Basic Document that gives
rise to the Servicer's breach.
(c) Promptly after receipt by an Indemnified Person of written notice of
its involvement in any action, proceeding or investigation, such
Indemnified Person shall, if a claim for indemnification in respect thereof
is to be made against the Servicer under this Section 5.02, notify the
Servicer in writing of such involvement. With respect to any action,
proceeding or investigation brought by a third party for which
indemnification may be sought by an Indemnified Person under this Section
5.02, the Servicer shall be entitled to assume the defense of any such
action, proceeding or investigation unless (x) such action, proceeding or
investigation exposes the Indemnified Person to a risk of criminal
liability or forfeiture, (y) the Servicer and such Indemnified Person have
a conflict of interest in their respective defenses of such action,
proceeding or investigation or (z) there exists at the time the Servicer
would assume such defense an ongoing Servicer Default. Upon assumption by
the Servicer of the defense of any such action, proceeding or
investigation, the Indemnified Person shall have the right to participate
in such action or proceeding and to retain its own counsel (including local
counsel), and the Servicer shall bear the reasonable fees, costs and
expenses of such separate counsel. The Indemnified Person shall not settle
or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought under this Section 5.02 (whether or not the
Servicer is an actual or potential party to such claim or action) unless
the Servicer agrees in writing to such settlement, compromise or consent
and such settlement, compromise or consent includes an unconditional
release of the Servicer from all liability arising out of such claim,
action, suit or proceeding.
(d) The Servicer shall indemnify the Trustee and its respective
trustees, officers, directors, employees and agents for, and defend and
hold harmless each such Person from and against, any and all Losses that
may be imposed upon, incurred by or asserted against any such Person as a
result of the acceptance or performance of the trusts and duties contained
herein and in the Indenture, except to the extent that any such Loss (i)
shall be due to the willful misconduct, bad faith or gross negligence of
the Trustee or (ii) shall arise from the Trustee's breach of any of its
representations or warranties set forth in the Indenture; provided,
however, that the foregoing indemnity is extended to the Trustee solely in
its individual capacity and not for the benefit of the Transition
Bondholders or any other Person. Such amounts with respect to the Trustee
shall be deposited and distributed in accordance with the Indenture.
(e) The Servicer's indemnification obligations under Section 5.02(b) and
(d) for events occurring prior to the removal or resignation of the Trustee
or the termination of this Agreement shall survive the resignation or
removal of the Trustee or the termination of this Agreement and shall
include reasonable costs, fees and expenses of investigation and litigation
(including the Issuer's and the Trustee's reasonable attorneys' fees and
expenses).
(f) Except to the extent expressly provided for in this Agreement, the
Sale Agreement or the Formation Documents (including the Servicer's claims
with respect to the Servicing Fees and the Seller's claim for payment of
the purchase price of Transition Property), the Servicer hereby releases
and discharges the Issuer (including its members, managers,
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employees and agents, if any), and the Trustee (including its respective
officers, directors and agents) (collectively, the "Released Parties") from
any and all actions, claims and demands whatsoever, which the Servicer, in
its capacity as Servicer, shall or may have against any such Person
relating to the Transition Property or the Servicer's activities with
respect thereto other than any actions, claims and demands arising out of
the willful misconduct, bad faith or gross negligence of the Released
Parties.
(g) The Servicer and the Issuer hereby acknowledge that, notwithstanding
anything herein to the contrary, the Trustee is a third-party beneficiary
of this Section 5.02 and is entitled to the benefits of the indemnity from
the Servicer contained herein and to bring any action to enforce such
indemnification directly against the Servicer.
SECTION 5.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS
OF, SERVICER. Any Person into which the Servicer may be merged, or consolidated
which succeeds to all or substantially all of the electric transmission and
distribution business of the Servicer (or, if the Servicer's transmission and
distribution functions are split, which provides distribution services directly
to Customers),
(a) which results from the division of the Servicer into two or more
Persons and which succeeds to all or substantially all of the electric
transmission and distribution business of the Servicer (or, if the
Servicer's transmission and distribution functions are split, which
provides distribution services directly to Customers),
(b) which may result from any merger or consolidation to which the
Servicer shall be a party and which succeeds to all or substantially all of
the electric transmission and distribution business of the Servicer (or, if
the Servicer's transmission and distribution functions are split, which
provides distribution services directly to Customers),
(c) which may succeed to the properties and assets of the Servicer
substantially as a whole and which succeeds to all or substantially all of
the electric transmission and distribution business of the Servicer (or, if
the Servicer's transmission and distribution functions are split, which
provides distribution services directly to Customers), or
(d) which may otherwise succeed to the major part of the electric
transmission and distribution business of the Servicer (or, if the
Servicer's transmission and distribution functions are split, which
provides distribution services directly to Customers),
which Person in any of the foregoing cases executes an agreement of
assumption to perform every obligation of the Servicer under this
Agreement, shall be the successor to the Servicer under this Agreement
without the execution or filing of any document or any further act by any
of the parties to this Agreement; provided, however, that:
(i) immediately after giving effect to such transaction, the
representations and warranties made pursuant to Section 5.01 shall be
true and correct and no Servicer Default, and no event that, after
notice or lapse of time, or both, would become a Servicer Default, shall
have occurred and be continuing;
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(ii) the Servicer shall have delivered to the Issuer and the Trustee
an Officers' Certificate and an Opinion of Counsel each stating that
such consolidation, merger, conversion or succession and such agreement
of assumption comply with this Section 5.03 and that all conditions
precedent, if any, provided for in this Agreement relating to such
transaction have been complied with;
(iii) the Servicer shall have delivered to the Issuer, the Trustee
and the Rating Agencies an Opinion of Counsel either
(A) stating that, in the opinion of such counsel, all filings to
be made by the Servicer, including filings with the PUCT pursuant to
the Texas Electric Choice Plan and the UCC, that are necessary fully
to preserve and protect the interests of each of the Issuer and the
Trustee in the Transition Property have been executed and filed and
are in full force and effect, and reciting the details of such
filings or
(B) stating that, in the opinion of such counsel, no such action
is necessary to preserve and protect such interests;
(iv) the Rating Agencies shall have received prior written notice of
such transaction; and
(v) the Servicer shall have delivered to the Issuer, the Trustee and
the Rating Agencies an opinion of independent tax counsel (as selected
by, and in form and substance satisfactory to, the Servicer, and which
may be based on a ruling from the Internal Revenue Service) to the
effect that, for federal income tax purposes, such consolidation or
merger will not result in a material adverse federal income tax
consequence to the Servicer, the Issuer, the Trustee or the Transition
Bondholders.
The Servicer shall not consummate any transaction referred to in clauses (a),
(b), (c), (d) or (e) above except upon execution of the above-described
agreement of assumption and compliance with clauses (i), (ii), (iii), (iv) and
(v) above. When any Person acquires the properties and assets of the Servicer
substantially as a whole and becomes the successor to the Servicer in accordance
with the terms of this Section 5.03, then upon the satisfaction of all of the
other conditions of this Section 5.03, the Servicer shall automatically and
without further notice be released from its obligations hereunder.
Notwithstanding anything to the contrary contained in this Section 5.03, the
Servicer may convert into a Delaware limited liability company that shall be the
successor to the Servicer under this Agreement without the execution or filing
of any document or any further act by any of the parties to this Agreement,
without execution of the above-described agreement and without compliance with
clauses (i), (ii), (iii), (iv) or (v) above.
SECTION 5.04. ASSIGNMENT OF SERVICER'S OBLIGATIONS. Upon written notice to
the Trustee, the Servicer may assign a portion of its obligations hereunder to
an assignee (A) in accordance with the Intercreditor Agreement with respect to
the obligations to maintain and process any account into which initial
collections may be deposited and process payments in respect of Transition
Charges or (B) subject to the satisfaction of Section 5.03.
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SECTION 5.05. LIMITATION ON LIABILITY OF SERVICER AND OTHERS. The Servicer
shall not be liable to the Issuer or the Trustee, except as provided under this
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 against any liability that would
otherwise be imposed by reason of willful misconduct, bad faith or gross
negligence in the performance of its duties or by reason of reckless disregard
of its obligations and duties under this Agreement or the Intercreditor
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 Trustee or on any document of any kind, reasonably believed to be genuine
and to have been signed by the proper party respecting any matters arising under
this Agreement.
Except as provided in this Agreement, the Servicer shall not be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its duties to service the Transition Property in accordance with
this Agreement or related to its obligation to pay indemnification, and that in
its reasonable opinion may cause it to incur any expense or liability; provided,
however, that the Servicer may undertake any reasonable action that it may deem
necessary or desirable in respect of this Agreement and the rights and duties of
the parties to this Agreement and the interests of the Transition Bondholders
under this Agreement. In such event, the legal expenses and costs of such
action and any liability resulting therefrom shall be expenses, costs and
liabilities of the Servicer.
SECTION 5.06. RELIANT ENERGY NOT TO RESIGN AS SERVICER. Subject to the
provisions of Sections 5.03 and 5.04, Reliant Energy shall not resign from the
obligations and duties imposed on it as Servicer under this Agreement except
upon a determination that the performance of its duties under this Agreement
shall no longer be permissible under applicable law. Written notice of any such
determination permitting the resignation of Reliant Energy shall be communicated
to the Issuer, to the Trustee and to each Rating Agency at the earliest
practicable time, and any such determination shall be evidenced by an Opinion of
Counsel to such effect delivered to the Issuer and the Trustee concurrently with
or promptly after such notice. No such resignation shall become effective until
a successor Servicer shall have assumed the servicing obligations and duties
hereunder of the Servicer in accordance with Section 6.04.
SECTION 5.07. SERVICING FEE. The Issuer agrees to pay the Servicer on each
Payment Date, solely to the extent amounts are available therefor in accordance
with the Indenture, the Servicing Fee with respect to all Series of Transition
Bonds. For so long as Reliant Energy or one of its affiliates is the Servicer,
the amount of Servicing Fee paid to the Servicer annually shall equal 0.05% of
the Transition Bond Balance on the Initial Transfer Date and shall be prorated
into equal payment amounts based on the number of Payment Dates that are
expected to occur (a) in the remaining portion of the calendar year in which the
Servicer began to provide any of the services set forth in this Agreement
(provided that the Servicing Fee for such time period shall be prorated to the
fraction of a calendar year during which the Servicer provides any of the
services set forth in this Agreement) and (b) in each calendar year thereafter.
In the event that a successor Servicer not affiliated with Reliant Energy
is appointed in accordance with Section 5.03 or Section 6.04, the amount of
Servicing Fee paid to the Servicer annually shall be agreed upon by the
successor Servicer and the Trustee but shall in no event
17
exceed 0.60% of the Transition Bond Balance on the Initial Transfer Date and
shall be prorated into equal payment amounts as set forth in the preceding
paragraph. The foregoing fees constitute a fair and reasonable price for the
obligations to be performed by the Servicer. The Servicer agrees to pay from
amounts received as the Servicing Fee all fees due and owing pursuant to the
Intercreditor Agreement, and the Servicer shall not seek or be entitled to any
other or additional reimbursement therefor. Except to the extent provided in the
Indenture, the Trustee shall not be responsible or liable for the Servicing Fee
or any fees arising from the Intercreditor Agreement or for any increase or
differential in such fees.
SECTION 5.08. SERVICER EXPENSES. Except as otherwise expressly provided
herein, the Servicer shall be required to pay all expenses incurred by it in
connection with its activities hereunder and under the Intercreditor Agreement,
including fees and disbursements of independent accountants and counsel, taxes
imposed on the Servicer and expenses incurred in connection with reports to
Transition Bondholders.
SECTION 5.09. APPOINTMENTS. The Servicer, with written notice to the
Trustee, may at any time appoint a subservicer or agent 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
Issuer 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 subservicer or agent 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 the subservicer or agent shall be as agreed between the Servicer and its
subservicer or agent from time to time, and none of the Issuer, the Trustee or
the Transition Bondholders shall have any responsibility therefor. Any such
appointment shall not constitute a Servicer resignation under Section 5.06. The
Designated Account Holder shall constitute a subservicer for purposes of this
Section 5.09.
SECTION 5.10. NO SERVICER ADVANCES. Except as set forth in Section 3.03
regarding payments on account of TC Collections under the Collections Curve, the
Servicer shall not make any advances of interest on or principal of the
Transition Bonds.
SECTION 5.11. REMITTANCES.
(a) Except as provided in subsection (b) below, the Servicer shall remit
all TC Collections (from whatever source) received in accordance with
Section 3.03(b) and Section 3.03(c)(ii) and all proceeds of the Trust
Estate of the Issuer, if any, received by the Servicer, to the Trustee for
deposit pursuant to the Indenture, not later than the second Business Day
after the receipt thereof.
(b) Notwithstanding the foregoing clause (a), as long as:
(i) Reliant Energy or any successor to Reliant Energy's electric
transmission or distribution business, or both, remains the Servicer,
(ii) no Servicer Default has occurred and is continuing, and
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(iii) (A) Reliant Energy or such successor maintains a short-term
rating of "A-1" or better by Standard & Poor's, "P-1" or better by
Moody's and "F-1" or better by Fitch (and for five Business Days
following a reduction in either such rating),
(B) the Rating Agency Condition shall have been satisfied (and
any conditions or limitations imposed by the Rating Agencies in
connection therewith are complied with), or
(C) the Servicer obtains a letter of credit or surety bond in
form and substance satisfactory to the Trustee and issued by a bank
or surety company, as the case may be, having a long-term unsecured
credit rating of [____] or better from [_____] to assure remittances
of TC Collections on each Remittance Date,
the Servicer need not make the daily remittances required by Section
3.03(a)(i)(B), but in lieu thereof, shall remit all TC Collections (from
whatever source) in accordance with Section 3.03(a)(i)(A), and all proceeds of
the Trust Estate of the Issuer, if any, received by the Servicer during any
Collection Period, to the Trustee for deposit pursuant to the Indenture, not
later than the corresponding Monthly Remittance Date.
SECTION 5.12. PROTECTION OF TITLE. The Servicer shall execute and file all
such filings, including filings with the Secretary of State of the State of
Texas pursuant to the Texas Electric Choice Plan and Article 9 of the UCC, and
cause to be executed and filed all 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 Issuer and the Trustee in the Transition Property, including
all filings required under the Texas Electric Choice Plan and Article 9 of the
UCC relating to the transfer of the ownership or security interest in the
Transition Property by the Seller to the Issuer or any security interest granted
by the Issuer in the Transition Property. The Servicer shall deliver (or cause
to be delivered) to the Issuer and the Trustee file-stamped copies of, or filing
receipts for, any document filed as provided above, as soon as available
following such filing.
ARTICLE VI
SERVICER DEFAULT
SECTION 6.01. SERVICER DEFAULT. If any one of the following events (a
"Servicer Default") occurs and is continuing:
(a) any failure by the Servicer to remit to the Trustee, on behalf of
the Issuer, any required remittance by the date that such remittance must
be made that continues unremedied for a period of five Business Days after
written notice of such failure is received by the Servicer from the Issuer
or the Trustee; or
(b) any failure by the Servicer duly to observe or perform in any
material respect any other covenant or agreement of the Servicer set forth
in this Agreement (other than as provided in Section 6.01(a)) or any other
Basic Document to which it is a party in such capacity, which failure
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(i) materially and adversely affects the Transition Property or the
timely collection of the Transition Charges or the rights of the Trustee
or the Transition Bondholders, and
(ii) continues unremedied for a period of 60 days after written
notice of such failure has been given to the Servicer by the Issuer
(with a copy to the Trustee) or by the Trustee or after discovery of
such failure by an officer of the Servicer; or
(c) any representation or warranty made by the Servicer in this
Agreement or any Basic Document proves to have been incorrect when made,
which has a material adverse effect on the Transition Property or the
Issuer's ownership interest therein, the security interest of the Trustee
in the Transition Property, the Issuer, the Transition Bondholders or the
investment of the Transition Bondholders in the Transition Bonds, and which
material adverse effect continues unremedied for a period of 60 days after
the date on which written notice thereof shall have been given to the
Servicer (with a copy to the Trustee) by the Issuer or the Trustee or after
discovery of such failure by an officer of the Servicer, as the case may
be; or
(d) an Insolvency Event occurs with respect to the Servicer;
then, so long as the Servicer Default shall not have been remedied, and in no
other circumstances, the Trustee may, or shall upon the written instruction of
the Majority Holders, terminate all the rights and obligations (other than the
indemnification obligations set forth in Section 5.02 hereof and the obligation
under Section 6.04 to continue performing its functions as Servicer until a
successor Servicer is appointed) of the Servicer under this Agreement by notice
then given in writing to the Servicer (a "Termination Notice").
In addition, upon a Servicer Default, the Issuer and the Trustee shall be
entitled to (x) apply to a state district court located in Xxxxxx County, Texas,
for sequestration and payment to the Trustee of revenues arising with respect to
the Transition Property, (y) foreclose on or otherwise enforce the lien and
security interest in any Transition Property and (z) apply to the PUCT for an
order that amounts arising from the Transition Charges be transferred to a
separate account for the benefit of the Transition Bondholders, in accordance
with the Texas Electric Choice Plan.
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 Transition Property, the related Transition Charges or otherwise, shall,
upon appointment of a successor Servicer pursuant to Section 6.04, without
further action, pass to and be vested in such successor Servicer and, without
limitation, the Trustee is hereby authorized and empowered to execute and
deliver, on behalf of the predecessor Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
Termination Notice, whether to complete the transfer of the Transition Property
Documentation and related documents, or otherwise. The predecessor Servicer
shall cooperate with the successor Servicer, the Trustee and the Issuer in
effecting the termination of the responsibilities and rights of the predecessor
Servicer under this 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
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received by it with respect to the Transition Property or the related Transition
Charges. As soon as practicable after receipt by the Servicer of such
Termination Notice, the Servicer shall deliver the Transition Property
Documentation to the successor Servicer. All reasonable costs and expenses
(including attorneys' fees and expenses) incurred in connection with
transferring the Transition Property Documentation to the successor Servicer and
amending this Agreement or the Intercreditor Agreement to reflect such
succession as Servicer pursuant to this Section shall be paid by the predecessor
Servicer upon presentation of reasonable documentation of such costs and
expenses. Termination of Reliant Energy's rights as a Servicer shall not
terminate Reliant Energy's rights or obligations in its individual capacity
under the Sale Agreement or the Intercreditor Agreement (except rights
thereunder deriving from its rights as the Servicer hereunder).
SECTION 6.02. NOTICE OF SERVICER DEFAULT. The Servicer shall deliver to the
Issuer, to the Trustee and to each Rating Agency promptly after having obtained
actual knowledge thereof, but in no event later than five Business Days
thereafter, written notice in an Officer's Certificate of any event or
circumstance which, with the giving of notice or the passage of time, would
become a Servicer Default under Section 6.01.
SECTION 6.03. WAIVER OF PAST DEFAULTS. The Trustee, with the written
consent of the Majority Holders, may waive in writing any default by the
Servicer in the performance of its obligations hereunder and its consequences,
except a default in making any required remittances to the Trustee of TC
Collections from Transition Property in accordance with Section 5.11 of this
Agreement. Upon any such waiver of a past default, such default shall cease to
exist, and any Servicer Default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereto.
SECTION 6.04. APPOINTMENT OF SUCCESSOR.
(a) Upon the Servicer's receipt of a Termination Notice pursuant to
Section 6.01 or the Servicer's resignation in accordance with the terms of
this Agreement, the Servicer shall continue to perform its functions as
Servicer under this Agreement and shall be entitled to receive the
requisite portion of the Servicing Fees, until a successor Servicer shall
have assumed in writing the obligations of the Servicer hereunder as
described below. In the event of the Servicer's removal or resignation
hereunder, the Trustee at the written direction and with the consent of the
Majority Holders shall appoint a successor Servicer, and the successor
Servicer shall accept its appointment by a written assumption in form
acceptable to the Issuer and the Trustee. If, within 30 days after the
delivery of the Termination Notice, a new Servicer shall not have been
appointed and accepted such appointment, the Trustee may petition the PUCT
or a court of competent jurisdiction to appoint a successor Servicer under
this Agreement. A Person shall qualify as a successor Servicer only if:
(i) such Person is permitted under PUCT Regulations to perform the
duties of the Servicer pursuant to the Texas Electric Choice Plan, the
Financing Order and this Agreement,
(ii) the Rating Agency Condition shall have been satisfied, and
21
(iii) such Person enters into a servicing agreement with the Issuer
having substantially the same provisions as this Agreement and into the
Intercreditor Agreement (as TC Servicer).
(b) Upon appointment, the successor Servicer shall be the successor in
all respects to the predecessor Servicer under this Agreement and shall be
subject to all the responsibilities, duties and liabilities arising
thereafter relating thereto placed on the predecessor Servicer and shall be
entitled to the Servicing Fees and all the rights granted to the
predecessor Servicer by the terms and provisions of this Agreement.
(c) The successor Servicer may not resign unless it is prohibited from
serving as such by law.
SECTION 6.05. COOPERATION WITH SUCCESSOR. The Servicer covenants and agrees
with the Issuer that it will, on an ongoing basis, cooperate with the successor
Servicer and provide whatever information is, and take whatever actions are,
reasonably necessary to assist the successor Servicer in performing its
obligations hereunder.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.01. AMENDMENT. This Agreement may be amended by the Servicer and
the Issuer, with the prior written consent of the Trustee and PUCT and the
satisfaction of the Rating Agency Condition. Promptly after the execution of any
such amendment or consent, the Issuer shall furnish written notification of the
substance of such amendment or consent to each of the Rating Agencies.
Prior to the execution of any amendment to this Agreement, the Issuer and
the Trustee shall be entitled to receive and conclusively rely upon an Opinion
of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement and the Opinion of Counsel referred to in Section
3.11. The Issuer and the Trustee may, but shall not be obligated to, enter into
any such amendment which affects their own rights, duties or immunities under
this Agreement or otherwise.
SECTION 7.02. NOTICES. All demands, notices and communications upon or to
the Servicer, the Issuer, the Trustee or the Rating Agencies under this
Agreement shall be in writing, delivered personally, via facsimile, reputable
overnight courier or by first class mail, postage prepaid, and shall be deemed
to have been duly given upon receipt
(a) in the case of the Servicer, to Reliant Energy, 0000 Xxxxxxxxx
Xxxxxx, Xxxxxxx, Xxxxx 00000, Attention: Treasurer;
(b) in the case of the Issuer, to Reliant Energy Transition Bond Company
LLC, 0000 Xxxxxxxxx Xxxxxx, Xxxxx _____, Xxxxxxx, Xxxxx 00000, Attention:
Xxxx Xxxxxxxx, Sole Manager;
(c) in the case of the Trustee, at its Corporate Trust Office;
22
(d) in the case of Moody's, to Xxxxx'x Investors Service, Inc., ABS
Monitoring Department, 00 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000;
(e) in the case of Standard & Poor's, to Standard & Poor's Corporation,
00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000; and
(f) in the case of Fitch, to Fitch, Inc., 0 Xxxxx Xxxxxx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000;
or, as to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 7.03. ASSIGNMENT. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 5.03 and 5.04 and as provided
in the provisions of this Agreement concerning the resignation or termination of
the Servicer, this Agreement may not be assigned by the Servicer.
SECTION 7.04. LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of the Servicer, the Issuer and the
Trustee, on behalf of itself and the Transition Bondholders, and nothing in this
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Trust Estate or
under or in respect of this Agreement or any covenants, conditions or provisions
contained herein.
SECTION 7.05. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 7.06. SEPARATE COUNTERPARTS. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 7.07. HEADINGS. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 7.08. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of Texas, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 7.09. ASSIGNMENT TO THE TRUSTEE. The Servicer hereby acknowledges
and consents to any pledge, assignment and grant of a security interest by the
Issuer to the Trustee pursuant to the Indenture for the benefit of any
Transition Bondholders of all right, title and interest of the Issuer in, to and
under the Transition Property owned by the
23
Issuer and the proceeds thereof and the assignment of any or all of the Issuer's
rights hereunder and under the Intercreditor Agreement to the Trustee.
Notwithstanding such assignment, in no event shall the Trustee have any
liability for the representations, warranties, covenants, agreements or other
obligations of the Issuer, hereunder or in any of the certificates, notices or
agreements delivered pursuant hereto, as to all of which recourse shall be had
solely to the assets of the Issuer.
SECTION 7.10. NONPETITION COVENANTS. Notwithstanding any prior termination
of this Agreement or the Indenture, but subject to a court's rights to order the
sequestration and payment of revenues arising with respect to the Transition
Property pursuant to Section 39.309(f) of the Texas Electric Choice Plan, the
Servicer shall not, prior to the date which is one year and one day after the
termination of the Indenture, petition or otherwise invoke or cause the Issuer
to invoke the process of any court or government authority for the purpose of
commencing or sustaining a case against the Issuer under any federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Issuer or any substantial part of the property of the Issuer, or ordering the
winding up or liquidation of the affairs of the Issuer.
SECTION 7.11. TERMINATION. This Agreement shall terminate when all
Transition Bonds have been retired or redeemed in full.
SECTION 7.12. INTERCREDITOR AGREEMENT. The Issuer and the Servicer are
parties to the Intercreditor Agreement. So long as the Intercreditor Agreement
remains in effect, to the extent of any conflict between the terms of this
Agreement and the terms of the Intercreditor Agreement, the terms of the
Intercreditor Agreement shall govern.
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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.
RELIANT ENERGY TRANSITION BOND COMPANY LLC
By:
----------------------------------
Title:
RELIANT ENERGY, INCORPORATED, as Servicer
By:
----------------------------------
Title:
Acknowledged and Accepted:
Bankers Trust Company, not in its
individual capacity but solely as
Trustee on behalf of the Holders
of the Transition Bonds
By:
--------------------------------
Title:
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ANNEX 1
TO
TRANSITION PROPERTY SERVICING AGREEMENT
The Servicer agrees to comply with the following with respect to Reliant
Energy Transition Bond Company LLC (the "Issuer"):
SECTION 1. DEFINITIONS.
(a) Capitalized terms used herein and not otherwise defined shall have
the meanings set forth in Appendix A to the Transition Property Servicing
Agreement dated as of ___________, 2001, between the Issuer and Reliant
Energy, as Servicer.
(b) Whenever used in this Annex 1, the following words and phrases
shall have the following meanings:
"Adjustment Request" means an application filed by the Servicer with the
PUCT for revised Transition Charges and/or RAAFs pursuant to Section 7(b) of
this Annex.
SECTION 2. CHANGES TO RAAF METHODOLOGY PURSUANT TO PUCT ORDER. If, as
provided in Tariff TC, the PUCT enters an order pursuant to Section 39.253(f) of
the Texas Electric Choice Plan, the Servicer shall recalculate the applicable
initial RAAFs for each class of Customer set forth in Tariff TC using the
methodology set forth in such PUCT order, file the RAAF Adjustment within forty-
five (45) days of the order's becoming final and nonappealable, and the adjusted
RAAF shall become effective thirty (30) days thereafter.
SECTION 3. CALCULATION DATE STATEMENTS TO ISSUER AND TRUSTEE. For each
Calculation Date, the Servicer shall provide to the Issuer and the Trustee a
statement indicating
(a) the Transition Bond Balance and the Projected Transition Bond
Balance for each Series as of the immediately preceding Payment Date,
(b) the amount on deposit in the Overcollateralization Subaccount and
the Scheduled Overcollateralization Level as of the immediately preceding
Payment Date,
(c) the amount on deposit in the Capital Subaccount and the required
Capital Subaccount balance as of the immediately preceding Payment Date;
(d) the amount on deposit in the Reserve Subaccount as of the
immediately preceding Payment Date;
(e) the Projected Transition Bond Balance and the Servicer's
projection of the Transition Bond balance on the Payment Date immediately
preceding the next succeeding Adjustment Date;
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(f) the Scheduled Overcollateralization Level and the Servicer's
projection of the amount on deposit in the Overcollateralization Subaccount
for the Payment Date immediately preceding the next succeeding Adjustment
Date;
(g) the required Capital Subaccount balance and the Servicer's
projection of the amount on deposit in the Capital Subaccount for the
Payment Date immediately preceding the next succeeding Adjustment Date; and
(h) the Servicer's projection of the amount on deposit in the Reserve
Subaccount for the Payment Date immediately preceding the next succeeding
Adjustment Date.
SECTION 4. CALCULATION DATE ACTIVITY BETWEEN SERVICER AND REPS.
(a) On or about each Calculation Date, the Servicer shall reconcile
with each REP that has chosen to hold back an allowance for charge-offs in
its payments of TC Collections to the Servicer in accordance with the
Financing Order and Tariff TC the amounts held back by the REP since the
previous Calculation Date (or since the issuance of the applicable Series
of Transition Bonds, in the case of the first Calculation Date) and the
amounts actually written off as uncollectible from Customer accounts that
have been permanently terminated during the same time period.
(b) If the REP has held back less than the amount actually written off
as uncollectible during the time period, the REP shall be entitled to a
credit against future Transition Charge payments over the twelve-month
period immediately following the next Adjustment Date in the amount of the
hold-back shortfall and no other remedy. If the REP has held back more than
the amount actually written off as uncollectible during the time period,
the permitted charge-off percentage shall be adjusted so that it is
projected that the REP will remit to the Servicer the amount of such
underpayment of TC Collections over the twelve-month period immediately
following the next upcoming Adjustment Date.
(c) The Servicer will incorporate the REPs' Customer default
information and any subsequent credits to the REPs for Transition Charges
already paid by the REPs to the Servicer in its calculation of the
Transition Charge Adjustments on the Calculation Date. The REPs' right
under this Section 4 to receive a credit against future payments of TC
Collections to the Servicer shall not take effect until after the next
upcoming Adjustment Date.
(d) In any case the Servicer shall xxxx to and collect from each REP
such REP's share of the amount required to meet the requirements of the
Financing Order, provided that in addition each billing shall also include
the amount of the holdback allowed for chargeoffs.
SECTION 5. REMITTANCE STATEMENTS. On or before each remittance by the
Servicer to the Trustee, the Servicer shall prepare and furnish to the Issuer
and the Trustee a statement setting forth the aggregate amount remitted or to be
remitted by the Servicer to the Trustee for deposit on such date pursuant to the
Indenture.
2
SECTION 6. PAYMENT DATE STATEMENTS. By 12:00 noon Central Time on the
Business Day immediately preceding each Payment Date, the Servicer shall prepare
and furnish to the Issuer and to the Trustee a statement setting forth the
transfers and payments to be made in respect of such Payment Date pursuant to
Section 8.02(d) of the Indenture and the amounts thereof and the amounts to be
paid to Holders of Transition Bonds of each Series pursuant to Section 8.02(e)
of the Indenture.
SECTION 7. TRANSITION CHARGE AND RAAF ADJUSTMENTS.
(e) Prior to each Calculation Date, the Servicer shall calculate
(i) the RAAF Adjustments to be made in accordance with the methodology
set forth in Tariff TC, as may be modified from time to time by order from
the PUCT,
(ii) the Transition Bond Balance as of each Calculation Date (a written
copy of which shall be delivered by the Servicer to the Trustee within five
days following such Calculation Date), and
(iii) the Transition Charge Adjustment with respect to the Transition
Property for the then-current calendar year and each subsequent calendar
year, such that the Servicer projects that TC Collections therefrom
allocable to the Issuer will be sufficient so that:
(A) the Transition Bond Balance on the Payment Date immediately
preceding the next Adjustment Date will equal the Projected Transition
Bond Balance as of such date or, if earlier with respect to any Series
or Class of Transition Bonds, by the Expected Final Payment Date
therefor, taking into account any amounts on deposit in the Reserve
Subaccount,
(B) the amount on deposit in the Overcollateralization Subaccount
on the Payment Date immediately preceding the next Adjustment Date, or
if earlier with respect to any Series or Class of Transition Bonds, by
the Expected Final Payment Date therefor, will equal the Scheduled
Overcollateralization Level for such date, taking into account amounts
on deposit in the Reserve Subaccount,
(C) the amount on deposit in the Capital Subaccount on the Payment
Date immediately preceding the next Adjustment Date, or if earlier with
respect to any Series or Class of Transition Bonds, by the Expected
Final Payment Date therefor, will equal its required level for such
date, taking into account any amounts on deposit in the Reserve
Subaccount,
(D) thereafter, the TC Collections will provide for amortization of
the remaining outstanding principal amount of each Series in accordance
with the Expected Amortization Schedule therefor, payment of interest on
each Series when due and deposits to the Overcollateralization
Subaccount such that the balance therein will equal the Scheduled
Overcollateralization Level on each Payment Date,
3
(E) the Servicer can reconcile past overpayments and underpayments
by the REP of Transition Charges arising out of hold-backs for charge-
offs in accordance with Section 4 of this Annex,
(F) the Servicer can recover out of TC Collections the interest paid
to an REP arising out of a dispute between the Servicer and such REP
pursuant to Section 8(b) of this Annex for which the Servicer's claim to
the funds in dispute was not clearly unfounded, and
(G) the fees and expenses of the Servicer, the Trustee, the
independent managers of the Issuer and the Administrator and other fees
expenses, charges and costs authorized in the Financing Order will be
paid.
(f) On each Calculation Date, the Servicer shall make annual
reconciliation filings with the PUCT for that Calculation Date. The
Servicer's Calculation Date filings shall include:
(i) any RAAF Adjustments to take effect on the next Adjustment Date
(in which case, the Servicer shall provide notice of such filing to all
parties in PUCT Docket No. 21665 and shall participate in a contested
case proceeding at the PUCT, the purpose of which will be to determine
whether any proposed adjustment complies with the Financing Order, as
set forth therein), and
(ii) a tariff supplement setting forth Transition Charge Adjustments
to become effective on the next Adjustment Date and supporting data,
including the calculation of the Transition Charge Adjustments.
(g) The Servicer shall calculate any interim Transition Charge
Adjustments to be requested between Calculation Dates to correct under-
collection or over-collection of Transition Charges, as set forth in the
Financing Order and Tariff TC. In the event an interim Transition Charge
Adjustment is permitted under Tariff TC, the Servicer will file for such an
adjustment with the PUCT not less than fifteen days prior to the proposed
effective date of the interim Transition Charge Adjustment. The Servicer
will make the interim filing described in this Section 7(c) no more
frequently than every three months if quarterly payments are made to
Transition Bond Owners and no more frequently than every six months if
semi-annual payments are made to Transition Bond Owners.
(h) The Servicer shall take reasonable steps to monitor the Transition
Charge rate for each class of Customers to determine whether any such rate
exceeds the maximum rate that class of Customers is obligated to pay under
Section 39.202(a) of the Texas Electric Choice Plan. If such maximum rate
is being exceeded for any class of Customers ("Affected Class"), then the
Servicer shall cause the billing entity for Customers in the Affected Class
to apply the maximum rate allowed under that section to the Affected Class,
and the rates for all other classes of Customers ("Remaining Classes")
shall be recalculated using the maximum rate for the Affected Class. The
Servicer will allocate any resulting deficiency in Transition Charges to
the Remaining Classes based on the ratio of the RAAFs then in effect.
(i) On each Adjustment Date and Interim Adjustment Date, the Servicer
shall
4
(i) take all reasonable actions and make all reasonable efforts in
order to effectuate all adjustments approved by the PUCT to the
Transition Charges and/or RAAFs, and
(ii) promptly send to the Trustee copies of all material notices and
documents relating to such adjustments.
SECTION 8. OTHER ACTIVITY BETWEEN SERVICER AND REPS.
(a) In the event an REP provides a cash deposit to the Trustee in the
form of up to two months' maximum expected transition charge collections, a
surety bond or letter of credit (each an "REP Deposit") pursuant to the
Financing Order and Tariff TC,
(i) the Servicer shall agree with the REP as to the size of the
initial REP Deposit,
(ii) no more frequently than quarterly, upon the request of either
the REP or the Servicer, the Servicer shall cooperate with the REP as
required by the Financing Order and Tariff TC to ensure that the REP
Deposit accurately reflects up to two months' maximum TC Collections.
Within 10 days following the review by the REP and Servicer of the size
of the REP Deposit, either the REP shall remit to the Trustee the amount
of any shortfall in the REP Deposit or the Servicer shall instruct the
Trustee to remit to the REP any portion of the REP Deposit no longer
required to be on deposit,
(iii) The Servicer shall instruct the Trustee to remit to the REP
the REP Deposit, plus any investment earnings thereon, upon the Final
Maturity Date of the final Class, if applicable, of the final Series of
Transition Bonds except such portion of the REP Deposit as was utilized
in satisfaction of the REP's obligation to remit billed Transition
Charges, and
(iv) The Servicer shall instruct the Trustee to remit to the REP the
REP Deposit, plus any investment earnings thereon, within 30 days of the
date on which the REP Deposit is no longer required under the Financing
Order or Tariff TC.
(b) In the event an REP disputes any amount of billed Transition
Charges, the Servicer shall require the REP to pay the disputed amount
under protest within the time for payment set forth in Section 3.02 of this
Agreement. The Servicer shall attempt to resolve informally the dispute
with the REP, or any dispute related to the date of receipt of Transition
Charge payments, Penalties, or the size of the required REP Deposit. If the
REP and the Servicer cannot reach an informal resolution to the dispute,
either party may file a complaint with the PUCT as set forth in the
Financing Order and Tariff TC. If the REP prevails in the informal dispute
process or before the PUCT, the Servicer shall provide the REP with a
refund of the disputed amount paid to the Servicer plus interest at a rate
approved by the PUCT. As provided in the Financing Order, Tariff TC and
Section 7(a)(iii)(F) of this Annex, interest paid by the Servicer shall be
recoverable through Transition Charges if the Servicer's claim to the funds
is not clearly unfounded. In addition, as provided in the Financing Order
and Tariff TC, the Servicer shall not be required to pay interest to the
REP if the Servicer has received inaccurate
5
metering data from another entity providing competitive metering services
pursuant to the Texas Electric Choice Plan.
(c) The Servicer shall adhere to the instructions of an REP that bills
Customers for Transition Charges to terminate transmission and distribution
service to a Customer for nonpayment by the Customer pursuant to the
Financing Order and Tariff TC.
SECTION 9. OTHER ACTIVITIES BY SERVICER.
(a) In addition to the obligation set forth in Section 8(c) of this
Annex, the Servicer shall have the rights and obligations to terminate
electric service for non-payment of Transition Charges under the
circumstances set forth in Tariff TC and the rules and regulations of the
PUCT.
(b) If an REP fails to remit payment in full of all Transition Charges
billed to such REP by the day that is 45 calendar days after the REP
Billing Day, the Servicer shall, in addition to assessing the Penalty
against such REP described in Section 3.02(c) of the Servicing Agreement,
direct the Trustee by written instruction to apply from such REP's REP
Deposit into the Collection Account the lesser of the amount of Transition
Charges such REP has failed to remit or the amount of the REP Deposit. The
Servicer shall notify the REP of such transfer of funds from the REP
Deposit to the Collection Account and instruct the REP to remit immediately
the amount of such transfer to the Trustee for replenishment of such REP's
REP Deposit. The Servicer may require the REP to immediately remit funds
adequate to replenish its REP Deposit and avail itself of such legal
remedies as may be appropriate to collect any remaining unpaid Transition
Charges and associated penalties due to the Servicer after application of
the REP Deposit, in accordance with the Financing Order and Tariff TC.
(c) If an REP is in default pursuant to Section 9, Part B, Paragraphs
D(3) and (4) of Tariff TC and Findings of Fact 50(e) and (f) of the
Financing Order (such default an "REP Default"), the Servicer shall perform
such duties as are required of the Servicer therein, including but not
limited to the following:
(i) in the event the REP in REP Default seeks to implement
alternative arrangements with the Servicer regarding the billing and
collection of Transition Charges pursuant to Section 9, Part B,
Paragraph D(3) of Tariff TC and Finding of Fact 50(e) of the Financing
Order, the Servicer shall consider proposals from such REP but shall not
accept any proposal, and no proposal shall be deemed mutually suitable
and agreeable, other than the options set forth in Section 9, Part B,
Paragraphs D(3)(a) and D(3)(c) of Tariff TC unless (i) the Servicer is
directed promptly in writing by the Trustee to accept a proposal of such
REP following the approval of such proposal by the Majority Holders,
(ii) such proposal would not materially and adversely affect the
interests of the Transition Bondholders and (iii) the Rating Agency
Condition has been satisfied; and
(ii) in the event the REP in REP Default fails to immediately select
and implement an alternative method of billing and collecting Transition
Charges as specified in Section 9, Part B, Paragraph D(3) of Tariff TC
and Finding of Fact 50(e) of the Financing Order or fails to adequately
meet its responsibilities thereunder, the Servicer
6
shall immediately allow the Provider of Last Resort or another qualified
REP of a Customer's choosing to immediately assume responsibility for
the billing and collection of Transition Charges from such Customer.
(d) In the event the Provider of Last Resort defaults or is ineligible
to provide billing and collection of Transition Charges when requested by a
Customer or the Servicer, as applicable, the Servicer shall assume
responsibility for billing and collection of Transition Charges until a new
Provider of Last Resort is named by the PUCT or the Customer requests the
services of another REP, in accordance with Tariff TC and the rules and
regulations of the PUCT. In any case, the Servicer shall enforce the
obligations, and exercise its remedies against, each REP including any
POLR, at the earliest possible time permitted under the Financing Order and
Tariff TC.
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APPENDIX A
DEFINITIONS
The definitions contained in this Appendix A are applicable to the singular
as well as the plural forms of such terms.
"Act" has the meaning specified in Section 11.02 of the Indenture.
"Adjustment Date" means the date on which any Transition Charge Adjustment
and/or any RAAF Adjustment, as applicable, becomes effective. The first
Adjustment Date will be the first day of the month one year after the month
containing the date of the original issuance of any particular Series of
Transition Bonds, and all subsequent Adjustment Dates shall be the same day of
the year in subsequent years.
"Administration Agreement" means the Administration Agreement dated as of
____________, 2001, between Reliant Energy, as Administrator, and the Issuer, as
the same may be amended and supplemented from time to time.
"Administrator" means Reliant Energy as administrator under the
Administration Agreement.
"Affiliate" means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, control, when used with respect to any
specified Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms controlling and controlled
have meanings correlative to the foregoing.
"Annual Accountant's Report" has the meaning assigned to that term in
Section 3.07 of the Servicing Agreement.
"Basic Documents" means the Issuer LLC Agreement, the Issuer Certificate of
Formation, the Sale Agreement, the Servicing Agreement, the Intercreditor
Agreement, the Administration Agreement, the Indenture, any Supplemental
Indentures and any Bills of Sale.
"Billing Month" means a particular calendar month during which Transition
Charges are billed to Customers.
"Book-Entry Transition Bonds" means beneficial interests in the Transition
Bonds, ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.11 of the Indenture.
"Business Day" means any day other than a Saturday or Sunday or a day on
which banking institutions in the City of Houston, Texas, or in the City of New
York, New York, are required or authorized by law or executive order to remain
closed.
8
"Calculation Date" means, with respect to each Series of Transition Bonds,
the date on which the calculations and filings set forth in the Issuer Annex
will be made each year. The Calculation Date will be at least 15 days before
the Adjustment Date when the Servicer requests only Transition Charge
Adjustments, and at least 90 days before the Adjustment Date when the Servicer
requests any RAAF Adjustments (whether or not the Servicer also requests
Transition Charge Adjustments).
"Capital Subaccount" has the meaning specified in Section 8.02(a) of the
Indenture.
"Choice" means the first date on which a Customer may receive retail
electric service from an REP in the State of Texas, which is expected to be
either the beginning of the first billing cycle for each Customer following
January 1, 2002, or earlier, in the case of certain Pilot Programs.
"Class" means, with respect to any Series, any one of the classes of
Transition Bonds of that Series, as specified in the Series Supplement for that
Series.
"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
"Collection Account" has the meaning specified in Section 8.02(a) of the
Indenture.
"Collection Period" means the period from and including the first day of a
calendar month to but excluding the first day of the next calendar month.
"Collections Curve" means a separate forecast prepared by the Servicer for
two groups of Customer Classes of the percentages of amounts billed in a Pre-
Choice Billing Month that are expected to be received during each of the
following six months.
"Collections Curve Payment" means, with respect to a Billing Month, the sum
of the amounts paid to the Trustee by the Servicer over a seven-month period
following that Billing Month based on the Collections Curves for that Billing
Month.
"Corporate Trust Office" means the principal office of the Trustee at which
at any particular time its corporate trust business shall be administered, which
office at the date of the execution of the Indenture is located at ____________,
____________________________, Attention: _______ or at such other address as the
Trustee may designate from time to time by notice to the Transition Bondholders
and the Issuer, or the principal Corporate Trust Office of any successor Trustee
(the address of which the successor Trustee will notify the Transition
Bondholders and the Issuer).
"Current Remittance Month" means the calendar month in which a particular
Daily Remittance Date or Monthly Remittance Date occurs.
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"Curve Payment Shortfall" means, with respect to each Pre-Choice Billing
Month and the Reconciliation Date for such Billing Month, the excess of actual
TC Collections the Servicer has received for that Billing Month over the
Collections Curve Payments previously made to the Trustee by the Servicer for
that Billing Month.
"Customer Class" means each of the Transition Charge classes specified in
the Financing Order.
"Customers" means each Person from which Reliant Energy is authorized to
recover retail stranded costs under the Texas Electric Choice Plan or any PUCT
Regulation.
"Daily Remittance Date" means each Business Day of each calendar month.
"Default" means any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.
"Designated Account Holder" has the meaning specified in the Intercreditor
Agreement.
"DTC" means the Depository Trust Company.
"Event of Default" has the meaning specified in Section 5.01 of the
Indenture.
"Excess Curve Payment" means, with respect to each Pre-Choice Billing Month
and the Reconciliation Date for such Billing Month, the excess of the
Collections Curve Payments previously made to the Trustee by the Servicer for
that Billing Month over actual TC Collections the Servicer has received for that
Billing Month.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expected Amortization Schedule" means, with respect to each Series or, if
applicable, each Class of Transition Bonds, the expected amortization schedule
for principal thereof, as specified in the Series Supplement therefor.
"Expected Final Payment Date" means, with respect to each Series or, if
applicable, each Class of Transition Bonds, the date when all interest and
principal is scheduled to be paid for that Series or Class in accordance with
the Expected Amortization Schedule, as specified in the Series Supplement
therefor.
"Final Maturity Date" means, for each Series or, if applicable, each Class
of Transition Bonds, the date by which all principal and interest on the
Transition Bonds is required to be paid, as specified in the Series Supplement
therefor.
"Financing Order" means the Financing Order issued by the PUCT on May 31,
2000, pursuant to the Texas Electric Choice Plan.
"Fitch" means Fitch, Inc., or any successor thereto.
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"Formation Documents" means, collectively, the Issuer Certificate of
Formation, the Issuer LLC Agreement and any other document pursuant to which the
Issuer is formed or governed, as the same may be amended and supplemented from
time to time.
"Holder or Transition Bondholder" means the Person in whose name a
Transition Bond of any Series or Class is registered on the Transition Bond
Register.
"Indenture" means the Indenture dated as of _______________, 2001, between
the Issuer and the Trustee, as the same may be amended and supplemented from
time to time by one or more indentures supplemental thereto, and shall include
the forms and terms of the Transition Bonds established thereunder.
"Independent" means, when used with respect to any specified Person, that
the Person
(a) is in fact independent of the Issuer, any other obligor upon the
Transition Bonds, the Servicer and any Affiliate of any of the foregoing
Persons,
(b) does not have any direct financial interest or any material
indirect financial interest in the Issuer, any such other obligor, the
Servicer or any Affiliate of any of the foregoing Persons and
(c) is not connected with the Issuer, any such other obligor, the
Servicer or any Affiliate of any of the foregoing Persons as an officer,
employee, promoter, underwriter, trustee, partner, director or person
performing similar functions.
"Initial Transfer Date" means the Series Issuance Date for the first Series
of Transition Bonds.
"Initial Transition Property" means the Transition Property sold by the
Seller to the Issuer as of the Initial Transfer Date pursuant to 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 90 consecutive days, or
(b) the commencement by such Person of a voluntary case under any
applicable federal or State bankruptcy, insolvency or other similar law now
or hereafter in effect, or the consent by such Person to the entry of an
order for relief in an involuntary case under any such law, or the consent
by such Person to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
for such Person or for any substantial part of its property, or the making
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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.
"Intercreditor Agreement" means the Intercreditor Agreement dated as of
____________, 2001, as the same may be amended and supplemented from time to
time.
"Interim Adjustment Date" means the effective date of any interim (non-
annual) Transition Charge Adjustment.
"Issuance Advice Letter" means the letter filed by Reliant Energy with the
PUCT pursuant to Ordering Paragraph No. 5 of the Financing Order.
"Issuer" means Reliant Energy Transition Bond Company LLC, a Delaware
limited liability company, or its successor or the party named as such in the
Indenture until a successor replaces it and, thereafter, means the successor.
"Issuer Annex" means Annex 1 of the Servicing Agreement.
"Issuer Certificate of Formation" means the Certificate of Formation of the
Issuer that was filed with the Delaware Secretary of State on November 10, 1999,
as amended and restated and filed with the Delaware Secretary of State on
________, 2001.
"Issuer LLC Agreement" means the Amended and Restated Limited Liability
Company Agreement between the Issuer and Reliant Energy, as sole Member, dated
as of ________________, as the same may be amended and supplemented from time to
time.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind.
"Losses" means collectively, any and all liabilities, obligations, losses,
damages, payments, costs or expenses of any kind whatsoever.
"Majority Holders" means the Holders of a majority of the Outstanding
Amount of the Transition Bonds of all Series.
"Monthly Remittance Date" means the twentieth (20th) day of each calendar
month (or if such twentieth (20th) day is not a Business Day, the next Business
Day).
"Moody's" means Xxxxx'x Investors Service Inc., or any successor thereto.
"Officers' Certificate" means a certificate signed, in the case of Reliant
Energy, by
(a) the chairman of the board, the president, the vice chairman of the
board or any vice president; and
(b) a treasurer, assistant treasurer, secretary or assistant
secretary.
"Operating Expenses" means, with respect to the Issuer, all fees, costs,
expenses and indemnity payments owed by the Issuer, including all amounts owed
by the Issuer to the Trustee,
12
the Servicing Fee, the fee payable by the Issuer to the Administrator under the
Administration Agreement, the fees and expenses payable by the Issuer to the
trustees of the Issuer, legal fees and expenses of the Servicer pursuant to
Section 3.10 of the Servicing Agreement and legal and accounting fees, costs and
expenses of the Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who may
be an employee of or counsel to Reliant Energy, which counsel shall be
reasonably acceptable to the Trustee, the Issuer or the Rating Agencies, as
applicable, and which shall be in form reasonably satisfactory to the Trustee,
if applicable.
"Outstanding" with respect to Transition Bonds means, as of the date of
determination, all Transition Bonds theretofore authenticated and delivered
under the Indenture except:
(a) Transition Bonds theretofore cancelled by the Transition Bond
Registrar or delivered to the Transition Bond Registrar for cancellation;
(b) Transition Bonds or portions thereof the payment for which money
in the necessary amount has been theretofore deposited with the Trustee or
any Paying Agent in trust for the Holders of such Transition Bonds;
provided, however, that if such Transition Bonds are to be redeemed, notice
of such redemption has been duly given pursuant to the Indenture or
provision therefor, satisfactory to the Trustee; and
(c) Transition Bonds in exchange for or in lieu of other Transition
Bonds which have been authenticated and delivered pursuant to the Indenture
unless proof satisfactory to the Trustee is presented that any such
Transition Bonds are held by a bona fide purchaser;
provided that in determining whether the Holders of the requisite Outstanding
Amount of the Transition Bonds or any Series or Class thereof have given any
request, demand, authorization, direction, notice, consent or waiver hereunder
or under any Basic Document, Transition Bonds owned by the Issuer, any other
obligor upon the Transition Bonds, the Servicer or any Affiliate of any of the
foregoing Persons shall be disregarded and deemed not to be Outstanding, except
that, in determining whether the Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver, only
Transition Bonds that the Trustee knows to be so owned shall be so disregarded.
Transition Bonds so owned that have been pledged in good faith may be regarded
as Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Transition Bonds and that the
pledgee is not the Issuer, any other obligor upon the Transition Bonds, the
Servicer or any Affiliate of any of the foregoing Persons.
"Outstanding Amount" means the aggregate principal amount of all
Outstanding Transition Bonds or, if the context requires, all Outstanding
Transition Bonds of a Series or Class Outstanding at the date of determination.
"Overcollateralization Subaccount" has the meaning specified in Section
8.02(a) of the Indenture.
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"Paying Agent" means the Trustee or any other Person that meets the
eligibility standards for the Trustee specified in Section 6.11 of the Indenture
and is authorized by the Issuer to make the payments of principal of or premium,
if any, or interest on the Transition Bonds on behalf of the Issuer.
"Payment Date" means, with respect to each Series or, if applicable, each
Class of Transition Bonds, the date or dates specified as Payment Dates for such
Series or Class in the Series Supplement therefor.
"Penalty" means a late-fee penalty assessed by the Servicer against an REP
for the REP's failure to remit timely payments of Transition Charges as set
forth in Section 3.02(c) of this Agreement.
"Penalty Assessment Day" has the meaning specified in Section 3.02(c) of
the Servicing Agreement.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), business trust, limited liability company, unincorporated organization
or government or any agency or political subdivision thereof.
"Pilot Program" means a pilot program before Choice under which certain
Customers may choose to buy electric energy from certain REPs pursuant to
Section 39.104 of the Texas Electric Choice Plan.
"Pre-Choice Billing Month" has the meaning specified in Section 3.03(a).
"Proceeding" means any suit in equity, action at law or other judicial or
administrative proceeding.
"Projected Transition Bond Balance" means, as of any date, the anticipated
Outstanding Amount of Transition Bonds after giving effect to payment of the sum
of the amounts provided for in the Expected Amortization Schedules for each
outstanding Series of Transition Bonds and such date.
"Provider of Last Resort" has the meaning specified in Section 39.106 of
the Texas Electric Choice Plan.
"PUCT" means the Public Utility Commission of Texas or any successor.
"PUCT Regulations" means any regulations, rules, orders or directives
promulgated, issued or adopted by the PUCT.
"Qualified Costs" has the meaning assigned to that term in the Texas
Electric Choice Plan and the Financing Order.
14
"RAAF" means the regulatory asset allocation factor used to allocate
Transition Charges among different classes of Customers, as set forth in Tariff
TC and any other applicable tariff or order.
"RAAF Adjustment" means each adjustment to any RAAF made in accordance with
Section 4.01 of the Servicing Agreement, Tariff TC and any other applicable
tariff, any order issued by the PUCT pursuant to Section 39.253 of the Texas
Electric Choice Plan, and the Issuer Annex.
"Rating Agency" means any rating agency rating the Transition Bonds of any
Class or Series at the time of issuance thereof at the request of the Issuer,
which initially shall be Xxxxx'x, Fitch and Standard & Poor's. If no such
organization or successor is any longer in existence, "Rating Agency" shall be a
nationally recognized statistical rating organization or other comparable Person
designated by the Issuer, written notice of which designation shall be given to
the Trustee and the Servicer.
"Rating Agency Condition" means, with respect to any action, the
notification in writing to each Rating Agency of such action and confirmation
from S&P and Fitch to the Trustee and the Issuer that such action will not
result in a reduction or withdrawal of the then current rating by such Rating
Agency of any outstanding Series or Class of Transition Bonds.
"Receivables Servicer" means Reliant Energy and each successor to or
assignee of Reliant Energy (in the same capacity) pursuant to the Intercreditor
Agreement.
"Reconciliation Date" means, with respect to any Pre-Choice Billing Month,
the twentieth day (or if such twentieth day is not a Business Day, the next
Business Day) in the seventh month after such Billing Month.
"Redemption Date" means, with respect to each Series or, if applicable,
each Class of Transition Bonds, the date for the redemption of the Transition
Bonds of such Series or Class pursuant to Sections 10.01 or 10.02 of the
Indenture or the Series Supplement for such Series or Class, which in each case
shall be a Payment Date.
"Released Parties" has the meaning specified in Section 5.02(f) of the
Servicing Agreement.
"Reliant Energy" means Reliant Energy, Incorporated, a Texas corporation,
or its successor.
"Remittance Date" means a Daily Remittance Date or a Monthly Remittance
Date, as applicable.
"REP" means retail electric provider as such term is used in the Texas
Electric Choice Plan and includes any retail electric provider affiliated with
Reliant Energy, Incorporated.
"REP Billing Day" has the meaning specified in Section 3.02(c) of the
Servicing Agreement.
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"REP Default" has the meaning specified in Section 9(c) of the Issuer
Annex.
"REP Deposit" has the meaning specified in Section 8 of the Issuer Annex.
"Reserve Subaccount" has the meaning specified in Section 8.02(a) of the
Indenture.
"Retiring Trustee" means a Trustee that resigns or vacates the office of
Trustee for any reason.
"Sale Agreement" means the Transition Property Sale Agreement dated
_____________, 2001, between the Seller and the Issuer, as the same may be
amended and supplemented from time to time.
"Sale Date" means each date on which the Seller sells, transfers, assigns
and conveys the Transition Property to the Issuer.
"Scheduled Overcollateralization Level" means, with respect to any Payment
Date, the amount set forth as such in Schedule 1 of the Indenture, as such
Schedule has been adjusted in accordance with Section 3.19 of the Indenture to
reflect redemptions of Transition Bonds and issuances of additional Series of
Transition Bonds.
"Seller" means Reliant Energy, or its successor, in its capacity as seller
of the Transition Property to the Issuer pursuant to the Sale Agreement.
"Series" means any series of Transition Bonds issued and authenticated by
the Issuer pursuant to the Indenture, as specified in the Series Supplement
therefor.
"Series Issuance Date" means, with respect to any Series, the date on which
the Transition Bonds of such Series are to be originally issued in accordance
with Section 2.10 of the Indenture and the Series Supplement for such Series.
"Series Supplement" means an indenture supplemental to the Indenture that
authorizes a particular Series of Transition Bonds.
"Servicer" means Reliant Energy, as the servicer of the Transition
Property, and each successor to or assignee of Reliant Energy (in the same
capacity) pursuant to Section 5.03, 5.04, or 6.04 of the Servicing Agreement.
"Servicer Default" means an event specified in Section 6.01 of the
Servicing Agreement.
"Servicing Agreement" means the Servicing Agreement dated as of
___________, 2001, between the Issuer and the Servicer, and acknowledged by the
Trustee, as the same may be amended and supplemented from time to time.
"Servicing Fee" means the fee payable to the Servicer on each Payment Date
with respect to each series of Transition Bonds that pays interest and/or
principal on such Payment Date in an amount specified in Section 5.07 of the
Servicing Agreement.
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"Standard & Poor's" or "S&P" means Standard & Poor's Rating Group, a
division of The XxXxxx-Xxxx Companies, or any successor thereto.
"State" means any one of the 50 states of the United States of America or
the District of Columbia.
"Subsequent Transfer Date" means the date that a Subsequent Sale will be
effective, specified in a written notice provided by the Seller to the Issuer
pursuant to the Sale Agreement.
"Subsequent Transition Property" means Transition Property sold by the
Seller to the Issuer as of a Subsequent Transfer Date pursuant to the Sale
Agreement.
"Subsequent Sale" means the sale of additional Transition Property by the
Seller to the Issuer after the Initial Transfer Date, subject to the
satisfaction of the conditions specified in the Sale Agreement and the
Indenture.
"Successor Servicer" means a successor Servicer appointed by the Trustee
pursuant to Section 6.01 of the Servicing Agreement which will succeed to all
the rights and duties of the Servicer under the Servicing Agreement.
"Tariff TC" means the tariff on the form entitled "Schedule TC" approved by
the PUCT in the Financing Order and filed by Reliant Energy prior to the
issuance of any Transition Bonds.
"TC Collections" means amounts collected by any Person in respect of
Transition Charges and Transition Property
"TC Servicer" has the meaning specified in the Intercreditor Agreement.
"Termination Notice" has the meaning specified in Section 6.01 of the
Servicing Agreement.
"Texas Electric Choice Plan" means Chapter 39 of Title 2, Subtitle B of the
Texas Utilities Code and such other revisions to the Texas Utilities Code as
were effected by Senate Xxxx 7 as passed by the 76th Legislature of the State of
Texas, Regular Session, signed into law and effective.
"Transfer Date" means the Initial Transfer Date or any Subsequent Transfer
Date, as applicable.
"Transition Bond" means any of the Transition Bonds (as defined in the
Texas Electric Choice Plan) issued by the Issuer pursuant to the Indenture.
"Transition Bond Balance" means, as of any date, the aggregate Outstanding
Amount of all Series of Transition Bonds on such date.
"Transition Bond Owner" means, with respect to a Book-Entry Transition
Bond, the Person who is the beneficial owner of such Book-Entry Transition Bond,
as reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such
17
Clearing Agency (directly as a Clearing Agency Participant or as an indirect
participant, in each case in accordance with the rules of such Clearing Agency).
"Transition Bond Register" means a register, kept by the Transition Bond
Registrar on behalf of the Issuer, in which, subject to such reasonable
regulations as it may prescribe, the Transition Bond Registrar shall provide for
the registration of Transition Bonds and the registration of transfers of
Transition Bonds.
"Transition Bond Registrar" means the Trustee, in its capacity as keeper of
the Transition Bond Register, or any successor to the Trustee in such capacity.
"Transition Charge Adjustment" means each adjustment to Transition Charges
related to the Transition Property made in accordance with Section 4.01 of the
Servicing Agreement and the Issuer Annex or in connection with the redemption or
refunding by the Issuer of Transition Bonds.
"Transition Charges" means nonbypassable amounts to be charged for the use
or availability of electric services, approved by the PUCT in the Financing
Order to recover Qualified Costs, that shall be collected by Reliant Energy, its
successors, assignees or other collection agents as provided for in the
Financing Order.
"Transition Property" means the rights and interests of Seller or its
successor under the Financing Order once those rights are first transferred to
the Issuer or pledged in connection with the issuance of the Transition Bonds,
including the irrevocable right to impose, collect and receive through
Transition Charges payable by retail electric customers within Seller's
certificated service area as it existed on May 1, 1999, an amount sufficient to
cover the qualified costs of Seller authorized in the Financing Order, the right
to receive Transition Charges in amounts and at times sufficient to pay
principal and interest and make other deposits in connection with the Transition
Bonds and all revenues and collections resulting from Transition Charges.
"Transition Property Documentation" means all documents relating to the
Transition Property, including copies of the Financing Order and all documents
filed with the PUCT in connection with any Transition Charges Adjustment, as
described in Section 3.08 of the Servicing Agreement.
"Trust Estate" has the meaning specified in the Granting Clause of the
Indenture.
"Trustee" means Bankers Trust Company, a New York banking corporation, as
trustee, or its successor or any successor Trustee under the Indenture.
"UCC" means, unless the context otherwise requires, the Uniform Commercial
Code, as in effect in the relevant jurisdiction, as amended from time to time
18
