EXHIBIT 10.1
EXECUTION COPY
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INTANGIBLE TRANSITION PROPERTY
TRANSFER AGREEMENT
between
WEST PENN FUNDING CORPORATION
Seller
and
WEST PENN POWER COMPANY
Transferor
Dated as of November 16, 1999
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TABLE OF CONTENTS
Page
ARTICLE I
Definitions
SECTION 1.01. Definitions....................................................2
SECTION 1.02. Other Definitional Provisions..................................8
ARTICLE II
Conveyance of Intangible Transition Property
SECTION 2.01. Conveyance of Initial Intangible
Transition Property............................8
SECTION 2.02. Conveyance of Subsequent Intangible
Transition Property............................9
SECTION 2.03. Conditions to Conveyance of Intangible
Transition Property...........................10
ARTICLE III
Representations and Warranties of Transferor
SECTION 3.01. Organization and Good Standing................................13
SECTION 3.02. Due Qualification.............................................13
SECTION 3.03. Power and Authority...........................................14
SECTION 3.04. Binding Obligation............................................14
SECTION 3.05. No Violation..................................................14
SECTION 3.06. No Proceedings................................................15
SECTION 3.07. Approvals.....................................................16
SECTION 3.08. The Intangible Transition
Property......................................16
SECTION 3.09. Representations and Warranties of Seller......................21
ARTICLE IV
Covenants of the Transferor
SECTION 4.01. Corporate Existence...........................................22
SECTION 4.02. No Liens or Conveyances.......................................22
SECTION 4.03. Delivery of Collections.......................................23
SECTION 4.04. Notice of Liens...............................................23
SECTION 4.05. Compliance with Law...........................................23
SECTION 4.06. Covenants Related to Intangible
Transition Property...........................24
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SECTION 4.07. Notice of Indemnification Events..............................25
SECTION 4.08. Protection of Title...........................................26
SECTION 4.09. Taxes.........................................................27
ARTICLE V
The Transferor
SECTION 5.01. Liability of Transferor; Indemnities..........................27
SECTION 5.02. Merger or Consolidation of, or Assumption
of the Obligations of, Transferor.............30
SECTION 5.03. Limitation on Liability of
Transferor and Others.........................32
SECTION 5.04. Opinions of Counsel...........................................33
ARTICLE VI
Miscellaneous Provisions
SECTION 6.01. Amendment.....................................................34
SECTION 6.02. Notices.......................................................35
SECTION 6.03. Assignment....................................................36
SECTION 6.04. Limitations on Rights of Others...............................36
SECTION 6.05. Severability..................................................36
SECTION 6.06. Separate Counterparts.........................................36
SECTION 6.07. Headings......................................................37
SECTION 6.08. Governing Law.................................................37
SECTION 6.09. Assignment to Issuer and to Bond Trustee......................37
SECTION 6.10. Nonpetition Covenant..........................................38
SECTION 6.11. Perfection....................................................38
SECTION 6.12. Limitation of Liability.......................................39
Exhibit A Xxxx of Sale
Exhibit B Form of Opinion of Counsel Regarding Transfer
of Transferred Intangible Transition Property
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INTANGIBLE TRANSITION PROPERTY TRANSFER AGREEMENT
dated as of November 16, 1999, between WEST PENN FUNDING
CORPORATION, a Delaware corporation (the "Seller"), and
WEST PENN POWER COMPANY, a Pennsylvania corporation, and
its successors in interest to the extent permitted
hereunder, as Transferor (the "Transferor").
WHEREAS the Transferor desires to contribute from time to time
Intangible Transition Property created pursuant to the Statute and the
Qualified Rate Order in exchange for all of the outstanding capital stock of
the Seller;
WHEREAS the Seller is willing to acquire the Intangible Transition
Property;
WHEREAS the Seller intends to sell the Transferred Intangible
Transition Property to the Issuer and the Issuer intends to purchase the
Transferred Intangible Transition Property from the Seller pursuant to the
Sale Agreement;
WHEREAS the Issuer, in order to finance the purchase of the
Transferred Intangible Transition Property, will from time to time issue
Transition Bonds under the Indenture;
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WHEREAS the Issuer, to secure its obligations under all
Transition Bonds and the Indenture, will pledge its right, title and interest
in the Transferred Intangible Transition Property to the Bond Trustee for the
benefit of the Transition Bondholders; and
WHEREAS the Seller has determined that the transactions
contemplated by the Basic Documents are in the best interest of the Seller and
its creditors and represent a prudent and advisable course of action that does
not impair the rights and interests of the Seller's creditors.
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. (a) Whenever used in this Agreement, each
of the following words and phrases shall have the following meaning: "Addition
Notice" means, with respect to the transfer of Subsequent Intangible
Transition Property to the Seller pursuant to Section 2.02, notice, which
shall be given by the Transferor to the Seller and the Rating Agencies not
later than 10 days prior to the related Subsequent Contribution Date,
specifying the Subsequent
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Contribution Date for such Subsequent Intangible Transition Property.
"Agreement" means this Intangible Transition Property Transfer
Agreement, as the same may be amended and supplemented from time to time.
"Xxxx of Sale" means a xxxx of sale substantially in the form of
Exhibit A hereto.
"Business Day" has the meaning specified in the Servicing Agreement.
"Competitive Transition Charges" has the meaning specified in the
Servicing Agreement.
"Corporate Trust Office" means Four Xxxxxx Xxxxxx, Xxx Xxxx, XX
00000, Attention: Corporate Trust and Agency Services, Structural Finance
Group, or the principal corporate trust office of any successor Bond Trustee
(the address of which the successor Bond Trustee will notify the Transition
Bondholders and the Issuer).
"Customers" has the meaning specified in the Servicing Agreement.
"Fitch IBCA" has the meaning specified in the Servicing Agreement.
"Indemnification Event" has the meaning specified in Section
5.01(d).
"Indenture" means the Indenture dated as of November 16, 1999,
between the Issuer and the Bond Trustee,
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as the same may be amended and supplemented from time to time.
"Initial Contribution Date" means November 16, 1999.
"Initial Intangible Transition Property" means the Intangible
Transition Property, as identified in the related Xxxx of Sale, contributed to
the Seller on the Initial Contribution Date pursuant to such Xxxx of Sale in
connection with the issuance of the Series 1999-A Transition Bonds.
"Intangible Transition Charges" has the meaning specified in the
Servicing Agreement.
"Intangible Transition Property" has the meaning specified in the
Servicing Agreement.
"ITC Collections" has the meaning specified in the Servicing
Agreement.
"Lien" has the meaning specified in the Servicing Agreement.
"Losses" has the meaning specified in the Servicing Agreement.
"Moody's" has the meaning specified in the Servicing Agreement.
"Officers' Certificate" means a certificate signed by (a) the
chairman of the board, the president, the vice chairman of the board, the
executive vice president or any vice president and (b) a treasurer, assistant
treasurer,
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secretary or assistant secretary, in each case of the Transferor or the
Servicer, as appropriate.
"Opinion of Counsel" means one or more written opinions of counsel
who may be an employee of or counsel to the Transferor or the Servicer, which
counsel shall be reasonably acceptable to the Bond Trustee, the Seller, the
Issuer or the Rating Agencies, as applicable, and which shall be in form
reasonably satisfactory to the Bond Trustee, the Seller, if applicable.
"PUC" has the meaning specified in the Servicing Agreement.
"PUC Regulations" has the meaning specified in the Servicing
Agreement.
"Qualified Rate Order" has the meaning specified in the Servicing
Agreement.
"Qualified Transition Expenses" has the meaning specified in the
Servicing Agreement.
"Rate Schedule" has the meaning specified in the Servicing
Agreement.
"Retained Intangible Transition Property" means Intangible
Transition Property other than the Transferred Intangible Transition Property.
"Seller" has the meaning specified in the heading of this Agreement.
"Serviced Intangible Transition Property" has the meaning specified
in the Servicing Agreement.
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"Servicer" means West Penn, as the servicer of the Intangible
Transition Property, and each successor to West Penn (in the same capacity)
pursuant to Section 5.03 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
November 16, 1999, between the Issuer and the Servicer, as the same may be
amended and supplemented from time to time.
"Standard & Poor's" has the meaning specified in the Servicing
Agreement.
"Statute" has the meaning specified in the Servicing Agreement.
"Subsequent Contribution Date" means any date on which Subsequent
Intangible Transition Property is to be transferred to the Seller pursuant to
Section 2.02.
"Subsequent Intangible Transition Property" means Intangible
Transition Property, as identified in the related Xxxx of Sale, contributed to
the Seller on any Subsequent Contribution Date in connection with the issuance
of a Series of Transition Bonds.
"Third Party" has the meaning specified in the Servicing Agreement.
"Transferor" has the meaning specified in the heading of this
Agreement.
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"Transferred Intangible Transition Property" means, collectively,
the Initial Intangible Transition Property and any Subsequent Intangible
Transition Property.
"UCC" has the meaning specified in the Servicing Agreement.
"West Penn" has the meaning specified in the Servicing Agreement.
(b) Except as otherwise specified herein or as the context may
otherwise require, each of the following terms has the meaning set forth in
the Indenture for all purposes of this Agreement, and the definitions of such
terms are equally applicable both to the singular and plural forms of such
terms:
Term Section of the Indenture
Adjustment Date.............................. 1.01(a)
Affiliate.................................... 1.01(a)
Basic Documents.............................. 1.01(a)
Bond Trustee................................. 1.01(a)
Capital Subaccount........................... 1.01(a)
Collateral................................... 1.01(a)
Collection Account........................... 1.01(a)
General Subaccount........................... 1.01(a)
Holders or Transition
Bondholders . . . . . . . . . ............. 1.01(a)
Operating Expenses........................... 1.01(a)
Overcollateralization Amount................. 1.01(a)
Payment Date................................. 1.01(a)
Person....................................... 1.01(a)
Rating Agency................................ 1.01(a)
Rating Agency Condition...................... 1.01(a)
Reserve Subaccount........................... 1.01(a)
Series........................................ 1.01(a)
Servicing Fee................................. 1.01(a)
Transition Bonds.............................. 1.01(a)
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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, Schedule and Exhibit references contained in this
Agreement are references to Sections, Schedules and Exhibits in or to this
Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation".
(b) The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
ARTICLE II
Conveyance of Intangible Transition Property
SECTION 2.01. Conveyance of Initial Intangible Transition Property.
(a) Subject to the conditions specified in Section 2.03, the Transferor,
pursuant to a Xxxx of Sale, will irrevocably contribute, sell, transfer,
assign, set over and otherwise convey to the Seller, without recourse (subject
to the obligations herein), all right, title and interest of the Transferor in
and to the Initial Intangible Transition Property (such contribution, sale,
transfer, assignment, set over and conveyance of the Initial Intangible
Transition Property will include, to the fullest
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extent permitted by the Statute, the assignment of all revenues, collections,
claims, rights, payments, money or proceeds of or arising from the Intangible
Transition Charges related to the Initial Intangible Transition Property, as
the same may be adjusted from time to time). Such contribution, sale,
transfer, assignment, set over and conveyance will be expressly stated to be a
sale and, pursuant to Section 2812(e) of the Statute, shall be treated as an
absolute transfer of all of the Transferor's right, title and interest (as in
a true sale), and not as a pledge or other financing, of the Initial
Intangible Transition Property. The preceding sentence is the statement
referred to in Section 2812(e) of the Statute. The Transferor agrees and
confirms that after giving effect to the sale contemplated by such Xxxx of
Sale it has no rights in the Initial Intangible Transition Property to which a
security interest of creditors of the Transferor could attach because it has
sold all rights in the Initial Intangible Transition Property to the Seller
pursuant to Section 2812(e) of the Statute.
(b) Subject to the conditions specified in Section 2.03, the Seller,
pursuant to a Xxxx of Sale, will acquire the Initial Intangible Transition
Property from the Transferor.
SECTION 2.02. Conveyance of Subsequent Intangible Transition
Property. The Transferor may from time to time
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offer to contribute or sell additional Intangible Transition Property to the
Seller, subject to the conditions specified in Section 2.03. If any such offer
is accepted by the Seller, such Subsequent Intangible Transition Property
shall be contributed or sold to the Seller effective on the Subsequent
Contribution Date specified in the related Addition Notice, subject to the
satisfaction or waiver of the conditions specified in Section 2.03.
SECTION 2.03. Conditions to Conveyance of Intangible Transition
Property. The Transferor shall be permitted to contribute or sell Intangible
Transition Property to the Seller only upon the satisfaction or waiver of each
of the following conditions:
(i) on or prior to the Initial Contribution Date or Subsequent
Contribution Date, as applicable, the Transferor shall have delivered to
the Seller a duly executed Xxxx of Sale identifying the Intangible
Transition Property to be conveyed on that date;
(ii) as of the Initial Contribution Date or the Subsequent
Contribution Date, as applicable, the Transferor was not insolvent and
will not have been made insolvent by such sale and the Transferor is not
aware of any pending insolvency with respect to itself;
(iii) as of the Initial Contribution Date or the Subsequent
Contribution Date, as applicable, no breach by the Transferor of its
representations, warranties or
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covenants in this Agreement shall exist; and no Servicer Default shall
have occurred and be continuing;
(iv) as of the Initial Contribution Date or the Subsequent
Contribution Date, as applicable, (A) the Issuer shall have sufficient
funds available to pay the purchase price for the Transferred Intangible
Transition Property to be conveyed on such date and (B) all conditions to
the issuance of one or more Series of Transition Bonds intended to
provide such funds set forth in the Indenture shall have been satisfied
or waived;
(v) on or prior to the Initial Contribution Date or Subsequent
Contribution Date, as applicable, the Transferor shall have taken all
action required to transfer to the Seller ownership of the Transferred
Intangible Transition Property to be conveyed on such date, free and
clear of all Liens other than Liens created by the Issuer pursuant to the
Indenture; the Seller shall have taken any action required for the Seller
to transfer to the Issuer ownership of the Transferred Intangible
Transition Property to be conveyed on such date, free and clear of all
Liens other than Liens created by the Issuer pursuant to the Indenture;
and the Issuer or the Servicer, on behalf of the Issuer, shall have taken
any action required for the Issuer to grant the Bond Trustee a first
priority
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perfected security interest in the Collateral and maintain such security
interest as of such date; (vi) in the case of a sale of Subsequent
Intangible Transition Property only, on or prior to such Subsequent
Contribution Date, the Transferor shall have provided the Seller, the
Issuer and the Rating Agencies with a timely Addition Notice;
(vii) the Transferor shall have delivered to the Rating Agencies,
the Seller and the Issuer (A) an Opinion of Counsel with respect to the
transfer of the Transferred Intangible Transition Property then being
conveyed to the Seller substantially in the form of Exhibit B hereto and
(B) the Opinion of Counsel required by Section 5.04(a); and
(viii) the Transferor shall have delivered to the Bond Trustee, the
Seller and the Issuer an Officers' Certificate confirming the
satisfaction of each condition precedent specified in this Section 2.03.
ARTICLE III
Representations and Warranties of Transferor
As of the Initial Contribution Date and as of any Subsequent
Contribution Date, as applicable, the Transferor makes the following
representations and warranties on which the Seller has relied and will rely in
acquiring Transferred Intangible Transition Property. The Transferor agrees
and
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acknowledges that the following representations and warranties are also for
the benefit of the Issuer, as assignee of the Seller pursuant to the Sale
Agreement, and the Bond Trustee, as collateral assignee of the Issuer pursuant
to the Indenture. The representations and warranties shall survive the sale of
Transferred Intangible Transition Property to the Seller, the sale of the
Transferred Intangible Transition Property from the Seller to the Issuer
pursuant to the Sale Agreement and the pledge thereof to the Bond Trustee
pursuant to the Indenture.
SECTION 3.01. Organization and Good Standing. The Transferor is a
corporation duly organized and in good standing under the laws of the
Commonwealth of Pennsylvania, with corporate power and authority to own its
properties and conduct its business as currently owned or conducted.
SECTION 3.02. Due Qualification. The Transferor is duly qualified to
do business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the ownership
or lease of property or the conduct of its business shall require such
qualifications, licenses or approvals (except where the failure to so qualify
would not be reasonably likely to have a material adverse effect on the
Transferor's business, operations, assets, revenues, properties or prospects).
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SECTION 3.03. Power and Authority. The Transferor has the corporate
power and authority to execute and deliver this Agreement and to carry out its
terms; the Transferor has full corporate power and authority to own the
Intangible Transition Property and contribute, sell and assign the Initial
Intangible Transition Property, in the case of the Initial Contribution Date,
and the Subsequent Intangible Transition Property, in the case of each
Subsequent Contribution Date, as applicable, and the Transferor has duly
authorized such contribution, sale and assignment to the Seller by all
necessary corporate action; and the execution, delivery and performance of
this Agreement has been duly authorized by the Transferor by all necessary
corporate action.
SECTION 3.04. Binding Obligation. This Agreement constitutes a
legal, valid and binding obligation of the Transferor enforceable against the
Transferor in accordance with its terms subject to bankruptcy, receivership,
insolvency, fraudulent transfer, reorganization, moratorium or other laws
affecting creditors' rights generally from time to time in effect and to
general principles of equity (regardless of whether considered in a proceeding
in equity or at law).
SECTION 3.05. No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof do not
conflict with, result
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in any breach of any of the terms and provisions of, nor constitute (with or
without notice or lapse of time) a default under, the articles of
incorporation or by-laws of the Transferor, or any indenture, agreement or
other instrument to which the Transferor is a party or by which it shall be
bound; nor result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement or other
instrument; nor violate any law or any order, rule or regulation applicable to
the Transferor of any court or of any Federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Transferor or its properties.
SECTION 3.06. No Proceedings. There are no proceedings or
investigations pending or, to the Transferor's best knowledge, threatened,
before any court, Federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the Transferor or
its properties (i) asserting the invalidity of the Basic Documents or the
Transition Bonds, (ii) seeking to prevent the issuance of the Transition Bonds
or the consummation of any of the transactions contemplated by the Basic
Documents or the Transition Bonds or (iii) except as disclosed by the
Transferor to the Seller, seeking any determination or ruling that could
reasonably be expected to materially and adversely affect the performance
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by the Transferor of its obligations under, or the validity or enforceability
of, the Basic Documents or the Transition Bonds.
SECTION 3.07. Approvals. Except for UCC continuation filings, no
approval, authorization, consent, order or other action of, or filing with,
any court, Federal or state regulatory body, administrative agency or other
governmental instrumentality is required in connection with the execution and
delivery by the Transferor of this Agreement, the performance by the
Transferor of the transactions contemplated hereby or the fulfillment by the
Transferor of the terms hereof, except those that have been obtained or made.
SECTION 3.08. The Intangible Transition Property. (a) Information.
All information provided by the Transferor to the Seller with respect to the
Transferred Intangible Transition Property is correct in all material
respects.
(b) Effect of Transfer. The transfers and assignments herein
contemplated constitute sales of the Initial Intangible Transition Property or
the Subsequent Intangible Transition Property, as the case may be, from the
Transferor to the Seller and the beneficial interest in and title to the
Transferred Intangible Transition Property would not be part of the debtor's
estate in the event of the
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filing of a bankruptcy petition by or against the Transferor under any
bankruptcy law.
(c) Transfer Filings. The Transferor is the sole owner of the
Intangible Transition Property being sold to the Seller on the Initial
Contribution Date or Subsequent Contribution Date, as applicable; the
Transferred Intangible Transition Property has been validly transferred and
sold to the Seller free and clear of all Liens other than Liens contemplated
hereby. All filings, including filings with the PUC under the Statute,
necessary in any jurisdiction to give the Seller a valid ownership interest in
the Transferred Intangible Transition Property, free and clear of all Liens of
the Transferor or anyone claiming through the Transferor, and to give the
Seller a first priority perfected security interest in the Transferred
Intangible Transition Property have been made, other than any such filings
(except for filings with the PUC under the Statute and UCC filings with the
Secretary of State of the Commonwealth of Pennsylvania and the States of
Delaware and Nevada) the absence of which would not have an adverse impact on
(i) the ability of the Servicer to collect Intangible Transition Charges with
respect to the Serviced Intangible Transition Property or (ii) the rights of
the Seller with respect to the Transferred Intangible Transition Property.
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(d) Irrevocable; Process Valid; No Litigation; Etc. (i) The
Qualified Rate Order has been issued by the PUC in accordance with the
Statute, such order and the process by which it was issued comply with all
applicable laws, rules and regulations, and such order is in full force and
effect. (ii) As of the date of issuance of any Series of Transition Bonds,
such Transition Bonds are entitled to the protections provided by the Statute
and, accordingly, the provisions of the Qualified Rate Order relating to
Intangible Transition Property and Intangible Transition Charges are not
revocable by the PUC. (iii) (a) Under the Statute, neither the Commonwealth of
Pennsylvania nor the PUC may limit, alter or in any way impair or reduce the
value of Intangible Transition Property or Intangible Transition Charges
approved by the Qualified Rate Order or any rights thereunder, except such a
limitation or alteration may be made by the Commonwealth of Pennsylvania or
the PUC if adequate compensation is made by law for the full protection of the
Intangible Transition Charges and of Transition Bondholders; and (b) under the
Contract Clauses of the Constitutions of the Commonwealth of Pennsylvania and
the United States, the Commonwealth of Pennsylvania and the PUC cannot take
any action that substantially impairs the rights of the Transition Bondholders
unless such action is a reasonable exercise of the Commonwealth of
Pennsylvania's sovereign powers and appropriate to further a legitimate
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public purpose, and, under the Takings Clauses of the Pennsylvania and United
States Constitutions, in the event such action constitutes a permanent
appropriation of the property interest of Transition Bondholders in the
Intangible Transition Property and deprives the Transition Bondholders of
their reasonable expectations arising from their investments in Transition
Bonds, unless just compensation, as determined by a court of competent
jurisdiction, is provided to Transition Bondholders. (iv) There is no order by
any court providing for the revocation, alteration, limitation or other
impairment of the Statute, Qualified Rate Order, Intangible Transition
Property or the Intangible Transition Charges or any rights arising under any
of them or which seeks to enjoin the performance of any obligations under the
Qualified Rate Order. (v) No other approval, authorization, consent, order or
other action of, or filing with, any court, Federal or state regulatory body,
administrative agency or other governmental instrumentality is required in
connection with the creation of the Intangible Transition Property, except
those that have been obtained or made. (vi) Except as disclosed by the
Transferor to the Seller, there are no proceedings or investigations pending,
or to the Transferor's best knowledge, threatened before any court, Federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over
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the Transferor or its properties challenging the Qualified Rate Order or the
Statute. (vii) No failure on the Initial Contribution Date or any Subsequent
Contribution Date or any time thereafter to satisfy any condition imposed by
the Statute with respect to the recovery of stranded costs will adversely
affect the creation or sale hereunder of Intangible Transition Property or the
right to collect Intangible Transition Charges.
(e) Assumptions. The assumptions used in calculating Intangible
Transition Charges are reasonable and made in good faith.
(f) Creation of Intangible Transition Property. (i) The Intangible
Transition Property other than the Retained Intangible Transition Property
constitutes a current property right, (ii) the Intangible Transition Property
includes, without limitation, (A) the irrevocable right of the Seller and the
Issuer, as assignee of the Seller, to receive through Intangible Transition
Charges an amount sufficient to recover all of the Transferor's Qualified
Transition Expenses described in the Qualified Rate Order in an amount equal
to the aggregate principal amount of Transition Bonds plus an amount
sufficient to provide for any credit enhancement (including the
Overcollateralization Amount relating to each Series of Transition Bonds), to
fund any reserves, and to pay interest, premium, if any, servicing fees and
other expenses
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relating to the Transition Bonds, and (B) all right, title and interest of the
Transferor or its assignee applicable to the Transition Bonds in the Qualified
Rate Order and in all revenues, collections, claims, payments, money or
proceeds of or arising from the Intangible Transition Charges applicable to
the Transition Bonds set forth in the Qualified Rate Order to the extent that
in accordance with the Statute, the Qualified Rate Order and the rates and
charges authorized under the Qualified Rate Order are declared to be
irrevocable and (iii) the Qualified Rate Order, including the right to collect
Intangible Transition Charges, have been declared to be irrevocable by the
PUC.
(g) Solvency. After giving effect to the sale of any Transferred
Intangible Transition Property hereunder, the Transferor (i) is solvent and
expects to remain solvent, (ii) is adequately capitalized to conduct its
business and affairs considering its size and the nature of its business and
intended purposes, (iii) is not engaged in nor does it expect to engage in a
business for which its remaining property represents an unreasonably small
capital, (iv) believes that it will be able to pay its debts as they come due
and that such belief is reasonable and (v) is able to pay its debts as they
mature and does not intend to incur, or believe that it will incur,
indebtedness that it will not be able to repay at its maturity.
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SECTION 3.09. Representations and Warranties of Seller. The
representations and warranties made by the Seller under the Sale Agreement are
true and correct in all material respects.
ARTICLE IV
Covenants of the Transferor
SECTION 4.01. Corporate Existence. Subject to Section 5.02, so long
as any of the Transition Bonds are outstanding, the Transferor will keep in
full force and effect its corporate existence and remain in good standing, in
each case under the laws of the jurisdiction of its incorporation, and will
obtain and preserve its qualification to do business in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement and each other instrument or agreement to
which the Transferor is a party necessary to the proper administration of this
Agreement and the transactions contemplated hereby.
SECTION 4.02. No Liens or Conveyances. Except for the conveyances
hereunder, the Transferor will not sell, pledge, assign or transfer to any
other Person, or grant, create, incur, assume or suffer to exist any Lien on,
any of the Intangible Transition Property, whether now existing or hereafter
created, or any interest therein. The Transferor shall not at any time assert
any Lien against or with
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respect to any Serviced Intangible Transition Property, and shall defend the
right, title and interest of the Seller, the Issuer, as assignee of the
Seller, and the Bond Trustee, as collateral assignee of the Issuer, in, to and
under the Intangible Transition Property, whether now existing or hereafter
created, against all claims of third parties claiming through or under the
Transferor.
SECTION 4.03. Delivery of Collections. If the Transferor receives
collections in respect of the Intangible Transition Charges, other than
Intangible Transition Charges relating to Retained Intangible Transition
Property, or the proceeds thereof, the Transferor agrees to pay the Servicer
all payments received by the Transferor in respect thereof as soon as
practicable after receipt thereof by the Transferor, but in no event later
than two Business Days after such receipt.
SECTION 4.04. Notice of Liens. The Transferor shall notify the
Issuer and the Bond Trustee promptly after becoming aware of any Lien on any
Intangible Transition Property other than the conveyances hereunder, under the
Sale Agreement or under the Indenture.
SECTION 4.05. Compliance with Law. The Transferor hereby agrees to
comply with its organizational or governing documents and all laws, treaties,
rules, regulations and determinations of any governmental instrumentality
applicable to the Transferor, except to the
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extent that failure to so comply would not adversely affect the Seller's, the
Issuer's or the Bond Trustee's interests in the Intangible Transition Property
or under any of the Basic Documents or the Transferor's performance of its
obligations hereunder or under any of the other Basic Documents to which it is
a party.
SECTION 4.06. Covenants Related to Intangible Transition Property.
(a) So long as any of the Transition Bonds are outstanding, the Transferor
shall treat the Transition Bonds as debt of the Seller for Federal income tax
purposes.
(b) So long as any of the Transition Bonds are outstanding, the
Transferor shall (i) clearly disclose in its financial statements that it is
not the owner of the Serviced Intangible Transition Property and that the
assets of the Issuer are not available to pay creditors of the Transferor or
any of its Affiliates and (ii) clearly disclose the effects of all
transactions among the Transferor, the Seller and the Issuer in accordance
with generally accepted accounting principles.
(c) The Transferor agrees that upon the sale by the Transferor of
the Transferred Intangible Transition Property to the Seller pursuant to a
Xxxx of Sale, (i) to the fullest extent permitted by law, including applicable
PUC Regulations, the Seller shall have all of the rights originally held by
the Transferor with respect to the
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Transferred Intangible Transition Property (other than the rights of an
electric distribution company set forth in Section 2807 of the Statute),
including the right to collect any amounts payable by any Customer or Third
Party in respect of such Transferred Intangible Transition Property,
notwithstanding any objection or direction to the contrary by the Transferor
and (ii) any payment by any Customer or Third Party to the Seller shall
discharge such Customer's or such Third Party's obligations in respect of such
Transferred Intangible Transition Property to the extent of such payment,
notwithstanding any objection or direction to the contrary by the Transferor.
(d) So long as any of the Transition Bonds are outstanding, (i) the
Transferor shall not make any statement or reference in respect of the
Transferred Intangible Transition Property that is inconsistent with the
ownership thereof by the Seller or, after the sale of the Transferred
Intangible Transition Property by the Seller to the Issuer, the Issuer and
(ii) the Transferor shall not take any action in respect of the Serviced
Intangible Transition Property except solely in its capacity as the Servicer
thereof pursuant to the Servicing Agreement or as otherwise contemplated by
the Basic Documents.
SECTION 4.07. Notice of Indemnification Events. The Transferor shall
deliver to the Seller, the Issuer and the Bond Trustee promptly after having
obtained knowledge
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thereof, written notice in an Officers' Certificate of any Indemnification
Event or any event which, with the giving of notice or the passage of time,
would become an Indemnification Event.
SECTION 4.08. Protection of Title. The Transferor shall execute and
file such filings, including filings with the PUC pursuant to the Statute, and
cause to be executed and filed such filings, all in such manner and in such
places as may be required by law fully to preserve, maintain, and protect the
interests of the Seller in the Transferred Intangible Transition Property,
including all filings required under the Statute relating to the transfer of
the ownership or security interest in the Transferred Intangible Transition
Property by the Transferor to the Seller. The Transferor shall deliver (or
cause to be delivered) to the Seller file-stamped copies of, or filing
receipts for, any document filed as provided above, as soon as available
following such filing. The Transferor 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 (i) to protect the Seller, the
Issuer and the Transition Bondholders from claims, state actions or other
actions or proceedings of third parties which, if successfully pursued, would
result in a breach of any representation or warranty set forth in
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Article III or (ii) to block or overturn any attempts to cause a repeal of,
modification of or supplement to the Statute or the Qualified Rate Order or
the rights of holders of Intangible Transition Property by legislative
enactment or constitutional amendment that would be adverse to the holders of
Intangible Transition Property.
SECTION 4.09. Taxes. So long as any of the Transition Bonds are
outstanding, the Transferor shall, and shall cause each of its subsidiaries
to, pay all material taxes, including assessments and governmental charges
imposed upon it or any of its properties or assets or with respect to any of
its franchises, business, income or property before any penalty accrues
thereon if the failure to pay any such taxes, assessments and governmental
charges would, after any applicable grace periods, notices or other similar
requirements, result in a lien on the Intangible Transition Property; provided
that no such tax need be paid if the Transferor or one of its subsidiaries is
contesting the same in good faith by appropriate proceedings promptly
instituted and diligently conducted and if the Transferor or such subsidiary
has established appropriate reserves as shall be required in conformity with
generally accepted accounting principles.
ARTICLE V
The Transferor
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SECTION 5.01. Liability of Transferor; Indemnities. (a) The
Transferor shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by the Transferor under this Agreement.
(b) The Transferor shall indemnify the Seller, the Issuer and the
Bond Trustee, for itself and on behalf of the Transition Bondholders, and each
of their respective members, managers, officers, directors and agents for, and
defend and hold harmless each such Person from and against, any and all taxes
(other than any taxes imposed on Transition Bondholders solely as a result of
their ownership of Transition Bonds) that may at any time be imposed on or
asserted against any such Person as a result of the acquisition or holding of
the Transferred Intangible Transition Property by the Seller or the Issuer or
the issuance and sale by the Issuer of the Transition Bonds, including any
sales, gross receipts, general corporation, tangible personal property,
privilege or license taxes.
(c) The Transferor shall indemnify the Seller, the Issuer and the
Bond Trustee, on behalf of the Transition Bondholders, each of their
respective members, managers, officers, directors, and agents, and defend and
hold harmless each such Person from and against, any and all amounts of
principal of and interest on the Transition Bonds not paid when due or when
scheduled to be paid in accordance
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with their terms and the amount of any deposits to the Issuer required to have
been made in accordance with the terms of the Basic Documents which are not
made when so required, in either case as a result of the Transferor's breach
of any of its representations, warranties or covenants contained in this
Agreement.
(d) The Transferor shall indemnify the Seller, the Issuer and the
Bond Trustee, on behalf of the Transition Bondholders, each of their
respective members, managers, officers, directors, and agents, and defend and
hold harmless each such Person from and against, any and all Losses that may
be imposed on, incurred by or asserted against any such Person as a result of
(x) the Transferor's wilful misconduct, bad faith or gross negligence in the
performance of its duties or observance of its covenants under this Agreement,
(y) the Transferor's reckless disre gard of its obligations and duties under
this Agreement or (z) the Transferor's breach of any of its representations or
warranties contained in this Agreement (any event described in any of the
foregoing clauses (x), (y) or (z), an "Indemnification Event"). Amounts on
deposit in the Reserve Subaccount, the Overcollateralization Subaccount and
the Capital Subaccount shall not be available to satisfy any Losses for which
indemnification is provided in this Agreement.
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(e) The Transferor shall indemnify the Bond Trustee and its
officers, directors and agents for, and defend and hold harmless each such
Person from and against, any and all Losses that may be imposed upon, incurred
by or asserted against any such Person as a result of the acceptance or
performance of the trusts and duties contained herein and in the Indenture,
except to the extent that any such Loss shall be due to the wilful
misfeasance, bad faith or gross negligence of the Bond Trustee. Such amounts
shall be deposited into the Collection Account and distributed in accordance
with the Indenture.
(f) The Transferor's indemnification obligations under Section
5.01(b),(c), (d) and (e) for events occurring prior to the removal or
resignation of the Bond Trustee or the termination of this Agreement shall
survive the resignation or removal of the Bond Trustee or the termination of
this Agreement and shall include reasonable fees and expenses of investigation
and litigation (including the Bond Trustee's reasonable attorney's fees and
expenses).
SECTION 5.02. Merger or Consolidation of, or Assumption of the
Obligations of, Transferor. Any Person (a) into which the Transferor may be
merged or consolidated and which succeeds to the major part of the electric
distribution business of the Transferor, (b) which results from the division
of the Transferor into two or more Persons and which succeeds to the major
part of the electric
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distribution business of the Transferor, (c) which may result from any merger
or consolidation to which the Transferor shall be a party and which succeeds
to the major part of the electric distribution business of the Transferor, (d)
which may succeed to the properties and assets of the Transferor substantially
as a whole and which succeeds to the major part of the electric distribution
business of the Transferor or (e) which may otherwise succeed to the major
part of the electric distribution business of the Transferor, which Person in
any of the foregoing cases executes an agreement of assumption to perform
every obligation of the Transferor under this Agreement, shall be the
successor to the Transferor hereunder 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, no
representation or warranty made pursuant to Article III shall have been
breached and no Servicer Default, and no event that, after notice or lapse of
time, or both, would become a Servicer Default, shall have occurred and be
continuing, (ii) the Transferor shall have delivered to the Seller, the Issuer
and the Bond Trustee an Officers' Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession and such agreement of
assumption comply with this Section and that all conditions precedent, if any,
provided for in
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this Agreement relating to such transaction have been complied with, (iii) the
Rating Agencies shall have received prior written notice of such transaction
and (iv) the Transferor shall have delivered to the Seller, the Issuer and the
Bond Trustee an Opinion of Counsel either (A) stating that, in the opinion of
such counsel, all filings, including filings with the PUC pursuant to the
Statute, have been executed and filed that are necessary fully to preserve and
protect the interest of the Seller in the Transferred Intangible Transition
Property and reciting the details of such filings or (B) stating that, in the
opinion of such counsel, no such action shall be necessary to preserve and
protect such interests. Notwithstanding anything herein to the contrary, the
execution of the above described agreement of assumption and compliance with
clauses (i), (ii), (iii) and (iv) above shall be conditions precedent to the
consummation of any transaction referred to in clauses (a), (b), (c), (d) or
(e) above.
SECTION 5.03. Limitation on Liability of Transferor and Others. The
Transferor and any director or officer or employee or agent of the Transferor
may rely in good faith on the advice of counsel or on any document of any
kind, prima facie properly executed and submitted by any Person, respecting
any matters arising hereunder. Subject to Section 4.08, the Transferor shall
not be under any obligation to appear in, prosecute or defend any legal
160
action that is not incidental to its obligations under this Agreement, and
that in its opinion may involve it in any expense or liability.
SECTION 5.04. Opinions of Counsel. The Transferor shall deliver to
the Seller, the Issuer and the Bond Trustee: (a) promptly after the execution
and delivery of this Agreement and of each amendment hereto or to the
Servicing Agreement and on each Subsequent Contribution Date, an Opinion of
Counsel either (i) to the effect that, in the opinion of such counsel, all
filings, including filings with the PUC pursuant to the Statute, that are
necessary to fully preserve and protect the interests of the Seller in the
Intangible Transition Property have been executed and filed, and reciting the
details of such filings or referring to prior Opinions of Counsel in which
such details are given, or (ii) to the effect that, in the opinion of such
counsel, no such action shall be necessary to preserve and protect such
interest; and (b) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months after
the Initial Contribution Date, an Opinion of Counsel, dated as of a date
during such 90-day period, either (i) to the effect that, in the opinion of
such counsel, all filings with the PUC pursuant to the Statute, have been
executed and filed that are necessary to preserve fully and protect fully the
interest of the Seller in the
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Intangible Transition Property, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or
(ii) to the effect that, in the opinion of such counsel, no such action shall
be necessary to preserve and protect such interest. Each Opinion of Counsel
referred to in clause (a) or (b) above shall specify any action necessary (as
of the date of such opinion) to be taken in the following year to preserve and
protect such interest.
ARTICLE VI
Miscellaneous Provisions
SECTION 6.01. Amendment. This Agreement may be amended by the Seller
and the Transferor, with the prior written consent of the Issuer and the Bond
Trustee. The Seller shall furnish to each of the Rating Agencies (i) prior to
the execution of any such amendment or consent, written notification of the
substance thereof and (ii) promptly after the execution of any such amendment
or consent, a copy thereof.
Prior to the execution of any amendment to this Agreement, the
Seller, the Issuer and the Bond Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and the Opinion of Counsel referred
to in Section 5.04(a). The Seller, the Issuer and
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the Bond Trustee may, but shall not be obligated to, enter into any such
amendment which affects their own rights, duties, indemnities or immunities
under this Agreement or otherwise.
SECTION 6.02. Notices. All demands, notices and communications upon
or to the Transferor, the Seller, the Issuer, the Bond Trustee or the Rating
Agencies under this Agreement shall be in writing, delivered personally, via
facsimile, reputable overnight courier or by certified mail, return-receipt
requested, and shall be deemed to have been duly given upon receipt (a) in the
case of the Transferor, to West Penn Power Company, 000 Xxxxx Xxxx Xxxxx,
Xxxxxxxxxx, XX 00000, Attention of President, (b) in the case of the Seller,
to West Penn Funding Corporation, 0000X Xxxxxxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxx
00000, Attention of President, (c) in the case of the Issuer, to West Penn
Funding LLC, 0000X-0 Xxxxxxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxx 00000, Attention of
President, (d) in the case of the Bond Trustee, at the Corporate Trust Office,
(e) in the case of Moody's, to Xxxxx'x Investors Service, Inc., ABS Monitoring
Department, 00 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, (f) in the case of
Standard & Poor's, to Standard & Poor's Corporation, 00 Xxxxxxxx (00xx Xxxxx),
Xxx Xxxx, Xxx Xxxx 00000, Attention of Asset Backed Surveillance Department,
and (g) in the case of Fitch IBCA, to Fitch IBCA, Inc., Xxx Xxxxx Xxxxxx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention of
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ABS Surveillance; or, as to each of the foregoing, at such other address as
shall be designated by written notice to the other parties.
SECTION 6.03. Assignment. Notwithstanding anything to
the contrary contained herein, except as pro vided in Section 5.02, this
Agreement may not be assigned by the Transferor. SECTION 6.04. Limitations on
Rights of Others. The provisions of this Agreement are solely for the benefit
of the Transferor, the Seller, the Issuer and the Bond 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 Collateral or under or in respect
of this Agreement or any covenants, conditions or provisions contained herein.
SECTION 6.05. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
SECTION 6.06. Separate Counterparts. This Agreement may be executed
by the parties hereto in separate
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counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 6.07. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 6.08. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 6.09. Assignment to Issuer and to Bond Trustee. (a) The
Transferor hereby acknowledges and consent to the sale, transfer, assignment
and conveyance of all right, title and interest of the Seller in, to and under
the Transferred Intangible Transition Property and the proceeds thereof and
the assignment of any or all of the Seller's rights hereunder to the Issuer
pursuant to the Sale Agreement.
(b) The Transferor hereby acknowledges and consents to the mortgage,
pledge, assignment and grant of a security interest by the Issuer (as assignee
of the Seller) to the Bond Trustee pursuant to the Indenture for the benefit
of the Transition Bondholders of all right, title
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and interest of the Issuer in, to and under the Transferred Intangible
Transition Property and the proceeds thereof and the assignment of any or all
of the Issuer's rights under the Sale Agreement to the Bond Trustee.
SECTION 6.10. Nonpetition Covenant. Notwithstanding any prior
termination of this Agreement or the Indenture, but subject to the PUC's
rights to order the sequestration and payment of revenues arising with respect
to the Intangible Transition Property notwithstanding any bankruptcy,
reorganization or other insolvency proceedings with respect to the debtor,
pledgor or transferor of the Intangible Transition Property pursuant to
Section 2812(d)(3)(v) of the Statute, the Transferor 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 Seller or the Issuer to invoke the
process of any court or government authority for the purpose of commencing or
sustaining a case against the Seller or 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
Seller or the Issuer or any substantial part of the property of the Seller or
the Issuer, or ordering the winding up or liquidation of the affairs of the
Seller or the Issuer.
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SECTION 6.11. Perfection. In accordance with Section 2812(e) of the
Statute, upon the execution and delivery of this Agreement and the related
Xxxx of Sale, the transfer of the Initial Intangible Transition Property will
be perfected as against all third persons, including any judicial lien
creditors, and upon the execution and delivery of a Xxxx of Sale and, if
applicable, a supplement to this Agreement, a transfer of Subsequent
Intangible Transition Property will be perfected against all third persons,
including any judicial lien creditors.
SECTION 6.12. Limitation of Liability. It is expressly understood
and agreed by the parties hereto that this Agreement is executed and delivered
by Bankers Trust Company, not individually or personally but solely as Bond
Trustee for the benefit of the Transition Bondholders, in the exercise of the
powers and authority conferred and vested in it, and nothing herein contained
shall be construed as creating any liability on Bankers Trust Company,
individually or personally, to perform any covenant either expressed or
implied contained herein, all such liability, if any, being expressly waived
by the parties who are signatories to this Agreement and by any Person
claiming by, through or under such parties; provided, however, that this
provision shall not protect Bankers Trust Company against any liability that
would otherwise be imposed by reason of willful misconduct, bad faith or gross
negligence
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in the performance of duties or by reason of reckless disregard of obligations
or duties under this Agreement.
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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.
WEST PENN FUNDING CORPORATION,
Seller,
by
_______________________________
Title:
WEST PENN POWER COMPANY,
Transferor,
by
_______________________________
Title:
Acknowledged and Accepted:
WEST PENN FUNDING LLC, as
Issuer of the Transition
Bonds,
by
____________________
Title:
BANKERS TRUST COMPANY, not in
its individual capacity but
solely as Bond Trustee on
behalf of the Transition
Bondholders,
by
____________________
Title:
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